PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION

Transcription

1 Date: Docket: GSC Registry: Charlottetown PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION BETWEEN: BRENDA MACKINNON, KATELYN MACKINNON, JACKSON MACKINNON AND BRENDA MACKINNON, Litigation Guardian of Katelyn MacKinnon and Jackson MacKinnon, on behalf of the Dependents of Kent MacKinnon AND: WAWANESA MUTUAL INSURANCE COMPANY, UNIFUND INSURANCE COMPANY, ECONOMICAL MUTUAL INSURANCE COMPANY AND THE INSURANCE COMPANY OF PRINCE EDWARD ISLAND APPLICANTS RESPONDENTS BEFORE MADAM JUSTICE J.R. MATHESON (Contested Chambers) Kenneth L. Godfrey - Solicitor for the Applicants Patrick L. Aylward - Solicitor for Respondent/Wawanesa Mutual Insurance Co. Keith M. Boswell - Solicitor for Respondent/Unifund Insurance Company Benjamin B. Taylor, QC - Solicitor for Respondent/Economical Mutual Insurance Co. Gregory A. Cann - Solicitor for the Respondent/Insurance Company of PE.I. Place and Date of Hearing: June 10, 1997 Charlottetown, Prince Edward Island Supplementary Material Filed: June 17, 1997 and October 31, 1997 Place and Date of Judgment: December 1, 1997

2 Charlottetown, Prince Edward Island

3 GSC BETWEEN: BRENDA MACKINNON, KATELYN MACKINNON, JACKSON MACKINNON AND BRENDA MACKINNON, Litigation Guardian of Katelyn MacKinnon and Jackson MacKinnon, on behalf of the Dependents of Kent MacKinnon APPLICANTS AND: WAWANESA MUTUAL INSURANCE COMPANY, UNIFUND INSURANCE COMPANY, ECONOMICAL MUTUAL INSURANCE COMPANY AND THE INSURANCE COMPANY OF PRINCE EDWARD ISLAND Supreme Court of Prince Edward Island - Trial Division Before Madam Justice Jacqueline R. Matheson (Contested Chambers) Date of Hearing - June 19, 1997 Supplementary Materials Filed - June 17, 1997 & October 31, 1997 Date of Judgment - December 1, 1997 (9 pages) RESPONDENTS Cases Considered: Coombs et. al. v. Flavell et. al. (1988), 64 O.R. (2d) 737; Riddell et al. v. McClean et al., [1986] I.L.R. 7814; Schell v. Gore Mutual Insurance Company, [1988] I.L.R.; Prasad v. Gan Insurance Company (1997), 33 0.R. (3d) 481; Duncan et al v. Mayhew et al (1983), 44 0.R. (2d) 65 Statues Considered: The Insurance Act R.S.P.E.I. 1988, Cap. I-4 Rules Considered: Rules of Court, R.14.05(3)(d); Texts Considered: Insurance Law In Canada, Brown & Menezer (Carswells 1982) Kenneth L. Godfrey - Solicitor for the Applicants Patrick L. Aylward - Solicitor for Respondent \Wanesa Mutual nsurance Co. Keith M. Boswell - Solicitor for the Respondent\ Unifund Insurance Company Benjamin B. Taylor, Q.C. - Solicitor for Respondent\ Economical Mutual Insurance Co.

4 Page: 2 Gregory A. Cann - Solicitor for the Respondent\Insurance Company of P.E.I.

5 Page: 3 Matheson J.: [1] This is an application pursuant to Rule 14.05(3)(d) of the Rules of Court to determine the rights of the applicants to payment of death benefits under The Insurance Act R.S.P.E.I. 1988, Cap. I-4 and under Section B of four insurance policies. Facts [2] Kent MacKinnon was killed while a passenger in a motor vehicle operated by Irwin MacKinnon and owned and registered to Mark MacPhail. The applicant, Brenda MacKinnon, is Kent MacKinnon s spouse, and the applicants, Katelyn and Jackson MacKinnon, are his children. The respondent AWawanesa@ is the insurer of Kent McKinnon. The respondent AUnifund@ is the insurer of Mark MacPhail. The respondent AP.E.I.@ is the insurer of Irwin McKinnon. The respondent AEconomical@ is the insurer of Brenda McKinnon. [3] The Standard Automobile Policy of Insurance for P.E.I. contains the following provisions as required by s. 246(1) and s. 247(1) of the Insurance Act: SECTION B - ACCIDENT BENEFITS The Insurer agrees to pay to or with respect to each insured person as defined in this section who sustains... death by an accident arising out of the use or operation of an automobile: SUBSECTION 1 - MEDICAL, REHABILITATION AND FUNERAL EXPENSES SUBSECTION 2 - DEATH BENEFITS AND LOSS OF INCOME PAYMENTS Part I - Death Benefits A. Subject to the provisions of this Part, for death that ensues within 180 days of the accident or within 104 weeks of the accident if there has been continuous disability during that period, a payment - based on the status at the date of the accident of the deceased in a household where a spouse or dependants survive - of the following amounts: Head of the Household...$10,000 Spouse of the Head of the Household... 10,000

6 Page: 4 Dependant within the meaning of sub-subparagraph (b) of subparagraph (3) of paragraph B... 2,000 In addition, with respect to death of the head of the household, where there are two or more survivors - spouse or dependants - the principal sum payable is increased $1,000 for each survivor other than the first. B. For the purposes of this Part, (1) Aspouse of the head of the household@ means the spouse with the lesser income from employment in the twelve months preceding the date of the accident. (2) Aspouse@ means either of a man and woman who (a) are married to each other; (3) Adependant@ means (b) a person, (i) under the age of 18 years who resides with and is principally dependent upon the head of the household or the spouse of the head of the household for financial support. (4) The total amount payable shall be paid to a person who is the head of the household or the spouse of the head of the household, as the case may be, if that person survives the deceased by at least 30 days. SPECIAL PROVISIONS, DEFINITIONS AND EXCLUSIONS OF SECTION B (1) AINSURED PERSON@ DEFINED In this section, the words Ainsured person@ mean (a) any person while an occupant of the described automobile or of a newly acquired or temporary substitute automobile as defined in this policy;

7 Page: 5 (b) the insured and, if residing in the same dwelling premises as the insured, his or her spouse and any dependent relative of either while an occupant of any other automobile;... (4) NOTICE AND PROOF OF CLAIM The insured person or his agent, or the person otherwise entitled to make claim or his agent, shall, (a) (b) give written notice of claim to the Insurer by delivery thereof or by sending it by registered mail to the chief agency or head office of the Insurer in the Province, within 30 days from the date of the accident or as soon as practicable thereafter; within 90 days from the date of the accident for which the claim is made, or as soon as practicable thereafter, furnish to the Insurer such proof of claim as is reasonably possible in the circumstances of the happening of the accident and the loss occasioned thereby. (7) WHEN MONEYS PAYABLE (a) All amounts payable under this section, other than benefits under Part II of subsection 2, shall be paid by the Insurer within 30 days after it has received proof of claim. (8) LIMITATION ON BENEFIT PAYABLE Where a person is entitled to benefits under more than one contract providing insurance of the type set forth in subsections 1, 2 or 2A, he or his personal representative or any person claiming through or under him or by virtue of the Fatal Accidents Act may recover only an amount equal to one benefit. [4] In this case, the deceased, Kent MacKinnon, meets the definition of Ainsured person@ as set out in Section B and on its face, his spouse and dependants are entitled to benefits under Section B. Under section 256(1)(a) of the Act, the insurer of the owner of the motor vehicle involved in the accident is liable in the first instance. Written notice and proofs of claim were provided to Wawanesa on February 27, 1997, and to Unifund, Economical and P.E.I. on April 16, 1997.

8 Page: 6 [5] One or more of the respondents has declined payment of Section B death benefits on the basis of the consent exclusion contained in the General Provisions, Definitions and Exclusions of the Policies which reads: Issue: CONSENT OF INSURED No person shall be entitled to indemnity or payment under this policy who is an occupant of any automobile which is being used without the consent of the owner thereof. [6] Does this consent clause prevent the applicants from collecting Section B benefits? The applicants state that this exclusion does not apply to their claims because they were not occupants of the automobile. In the case of the Ano-fault@ death benefits of Section B, the applicants argue that the Legislature has seen fit to impose liability broadly upon the insurers of all involved parties so that these benefits are quickly paid to the deceased s survivors. [7] The respondents Unifund, Wawanesa, and Economical reply that Irwin MacKinnon was driving the vehicle without the consent of the owner and therefore none of their policies are engaged. In addition they state the applicants claim is derivative from the deceased. The respondent AP.E.I.@ argues that the vehicle in question is not a Adescribed@ automobile within its policy. Nature of the Applicants Claim [8] Unifund Wawanesa and Economical argue that the deceased and hence his dependents are not entitled to Section B benefits because of the requirement for consent of the owner of the vehicle to its use in section (3) of the General Provisions, Definitions and Exclusions in the Standard Automobile Policy. They claim the driver did not have the owner s permission to use the vehicle and therefore neither the deceased nor anyone claiming through him is entitled to Section B benefits. [9] This raises the issue of whether the applicants claim is derivative or an independent one. The respondents rely on the decision of the Ontario Court of Appeal Coombs et. al. v. Flavell et. al. (1988), 64 O.R. (2d) 737. The Coombs plaintiffs were injured while passengers in a motor vehicle driven without the owner s consent. They were claiming against a policy of insurance in which they were the unnamed insured, and the issue before the Divisional Court was whether they were entitled to claim as unnamed insured under that policy or whether they are limited to recovery under the Motor Vehicle Account Claims Fund. In an additional action heard at the same time, the infant plaintiff, R., was an

9 Page: 7 injured passenger in a motor vehicle driven without consent. As a member of the household, R. became an unnamed insured under his father s policy of insurance and claimed under the uninsured motorists coverage of that policy. [10] The issue in both cases was whether the provisions of s. 3 (the consent clause) of the general provisions of the Standard Automobile Policy apply to prevent the passengers in each case from recovering under the uninsured motorists coverage provided by the owner s policy. The Court held that it did and since, in the case of R., he had no cause of action against the insurer, his relatives who claim only through him also do not have a claim. [11] Justice Grange discussed this argument at page 9007: I now turn to the additional problem in the Riddell action. As I have stated, it is there claimed that while the passenger s claim is foreclosed by s. 3 (the consent clause) that of his relatives is not. This argument, advanced by Mr. Seabrook, is developed directly from the wording of the policy. The uninsured motorist coverage in s-s. 3 provides coverage for all sums that: (a) a person insured under the contract is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injuries resulting from an accident involving an automobile; (b) any person is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injury to or the death of a person insured under the contract resulting from an accident involving an automobile; Subparagraph (a) clearly applies to the passenger Steven Riddell who was an unnamed insured under his father s policy and subparagraph (b) applies to the relatives of Steven Riddell claiming under the Family Law Reform Act. It is to be noted, however, that it is only a person who is Aan occupant of any automobile which is being used without the consent of the owner@ who is precluded from recovery under the general provision of s. 3. It is argued, therefore, that while Steven Riddell must look to the Fund, his relatives, not having been occupants of the vehicle, can recover under the policy. It must be conceded that this would be a strange result. It would mean that the unnamed insured would make full recovery of his loss ($200,000) from the Fund and his relatives would make full recovery of their loss ($180,000) from the insurance company, whereas if the driving had been with the consent of the owner the total recovery would have been limited to the face amount of the policy, namely $200,000. I think the reasoning leading to that result fails to appreciate the true nature of the relatives action. I am in complete agreement with the views of the

10 Page: 8 Divisional Court expressed through Griffiths J. in Re Butler Trucking Co. and Brydges et al. (1984), 46 O.R. (2d) 686 at p. 689, In our opinion, the right of action of the parents, brother and sisters of the deceased person under s. 60 of the Family Law Reform Act is purely a derivative action depending on the entitlement of the deceased to personally maintain an action for damages in the circumstances of the accident if he had not been killed. In the decision of Fera et al. v. Ugccioni (1980), 29 O.R. (2d) 65, 112 D.L.R. (3d) 367, 18 R.F.L. (2d) 391 (H.C.J.), Anderson J. held that the right of action of dependants of an injured or deceased person under s. 60 of the Family Law Reform Act is Aclearly derivative or vicarious@. In our opinion, the respondent as plaintiff in the Supreme Court action could not maintain an action on behalf of the members of the family as an independent action for damages under s. 60 of the Family Law Reform Act because the deceased worker would not have been entitled to recover damages had he survived, his right of action against the applicants having been taken away by s. 8(9) of the Workers Compensation Act. Re Butler Trucking was not an insurance case but the reasoning applies to the case at bar. Steven Riddell had no cause of action against his father s insurance company by reason of s. 3 of the general provisions of the policy. It follows that his relatives, who claim only under him, have no claim against the insurance company either. They are not foreclosed by the policy. They are foreclosed because Steven Riddell through whom they claim is foreclosed by the policy. [12] At the trial level in Riddell et al. v. McClean et al., [1986] I.L.R. 7814, the trial judge held that the s. 3 consent provision didn t apply to Riddell s parents because they were not occupants of the vehicle. He based his decision that their claim was derivative on the wording of s. 60 of the Family Law Reform Act, which itself created a statutory cause of action separate from any claim under the insurance policy. Subsection 60(1) reads: Where a person is injured or killed by the fault or neglect of another under circumstances where the person is entitled to recover damages, or would have been entitled if not killed, the spouse, as defined in Part II, children, grandchildren, parents, grandparents, brothers and sisters of the person are entitled to recover their pecuniary loss resulting from the injury or death from the person from whom the person injured or killed is entitled to recover or would have been entitled if not killed, and to maintain an action for the purpose in a court of competent jurisdiction (emphasis added). [13] The trial judge described the effect of this subsection at page 7816 as follows: The first half of this subsection makes it a precondition to the s. 60 claims that the injured or deceased person is Aentitled to recover damages@, but does not say from whom. Were this phrase to be read alone, it would suggest that the s. 60

11 Page: 9 claimants need only establish that the injured or deceased person is or would have been entitled to recover damages from anyone. However, the latter half of the subsection specifically sets out the person from whom the s. 60 claimants may recover. It is one and the same Aperson from whom the person injured or killed is entitled to recover or would have been entitled if not killed@ (emphasis added). [14] The trial judge concludes at p. 7817: In short, while General Provision 3 does not directly bar family members who are not occupants of the automobile from sustaining their s. 60 claims, it does so indirectly. This is so because the very wording of s. 60 of the Family law Reform Act makes the claims of the family and relatives completely derivative of the claim of the injured or deceased person. It is not enough to show that this person has a cause of action and can establish the liability of the tortfeasor. Section 60 claimants must also demonstrate that the injured or deceased person is entitled to recover from the same party from whom they are seeking recovery. For these reasons, the s. 60 claims against Oxford Mutual Fire Insurance Company must fail. [15] The respondents argue that the same reasoning can be applied to this case. I do not agree. The decisions in Coombs and Riddell deal with claims under s. 60(1) of the Family Law Act which, on the specific wording of the Act, are derivative claims. These decisions are not applicable to this situation as the applicants are not claiming under the equivalent of section 60(1). [16] The applicants argue that the consent requirement applies only to the Aoccupant@ of the automobile being used without consent and therefore does not apply to them, relying on the decision in Schell v. Gore Mutual Insurance Company, [1988] I.L.R. In that case, the spouse of a man, killed in an accident involving a single vehicle driven without the owner s consent, claimed death benefits under the statutory no-fault benefits in the owner s s automobile policy. The Ontario Divisional Court of Appeal upheld the trial judge when he held that the exclusionary clause did not affect the plaintiff, because she was not an occupant. [17] Justice Southey writing for the Court said at p. 8813: There are no decided cases directly in point, and the result depends entirely on the interpretation and application of the terms of the policy The defendant s contention is that such exclusionary clause (lack of consent) disentitles the plaintiff to the death benefits to which she otherwise would have been entitled because her claim is said to be derivative from that of the deceased King.

12 Page: 10 The short answer to the defendant s contention is that the exclusionary clause applies only to persons who are occupants of the automobile being used without the owner s consent. It does not apply to the plaintiff in this case, because she was not an occupant. She is, therefore, entitled to the death benefit payable to a surviving spouse of an insured person. Counsel for the insurer submitted that such result would be unreasonable because it would apply equally to the spouse of a thief. That is so, provided the spouse was in no way involved culpably in the theft. The spouse would then be innocent, as in the case at bar but could not recover if she was an occupant of the vehicle. It is understandable that occupants are treated differently under the policy, because an occupant will often be able to exercise some restraint over the driver. [18] I agree Schell is correct in stating that the lack of consent clause does not apply to non-occupants of the vehicle. The wording of the non consent clause is this policy refers only to occupants of the vehicle, not to others who may have claims arising from this accident. [19] The wording of Section B in this case and in the Ontario statute at the time of the Schell decision is the same, in that it reads AThe insurer agrees to pay to or with respect to each insured person@. This raises the issue of the meaning of the words Awith respect to@. To determine this one must look at the nature of Section B. The benefits under this section are required to be included in every policy by statute. [20] In their text, Insurance Law In Canada, Brown & Menezer (Carswells 1982), the authors state at p.169, para 8:3:4: Section B of the standard owner s liability policy provides the first party statutory benefits required of all motor vehicle liability policies. The part of those benefits payable irrespective of liability in tort is sometimes referred to as Ano fault@ insurance. They are essentially personal accident insurance against disability or death for relatively low monetary limits. The cover is intended to provide for immediate payment to the victim of an automobile accident or to the spouse and dependant relatives. Section B benefits are first party insurance, and all persons insured are covered as though they were the named-insured and provided consideration. The persons insured are determined either by their relationship to the insured automobile or the named-insured. [emphasis added] [21] The words, Awith respect to@ in Section B are identifying words to describe the relationship between the applicants and the insured. The deceased is an insured person because he was an occupant of the automobile and the claimants are insured persons because of their relationship with the deceased. There is nothing in the wording of Section B, similar to the wording in ss. 60(1) of the Family Law Act to indicate that the claim of the spouse or dependant is derivative or constrained by limits applicable to the insured. In

13 Page: 11 my view, the applicants claim to Section B is independent to that of the insured and is not subject to the consent clause. [22] Accordingly the claimants are entitled to be paid the spousal and defendant s benefits available under Section B. Responsibility to Pay Claim [23] Section 256(1)(a) of the Insurance Act reads: 256.(1) Where a person entitled to benefits provided by insurance under section 246 or 247 (a) (b) is an occupant of a motor vehicle involved in an accident, the insurer of the owner of the motor vehicle is, in the first instance, liable for payment of the benefits provided by the insurance; or is a pedestrian and is struck by a motor vehicle involved in accident, the insurer of the owner of the motor vehicle is, in the first instance, liable for payment of the benefits provided by the insurance. [24] The claimants do not directly meet the conditions of a Aperson entitled to benefits@ in either subsection (a) or (b). However, they are entitled to claim Section B benefits because of their relationship with the deceased, who does meet the definition of a Aperson entitled to benefits@ in subsection (a). Therefore s.256 is applicable and the insurer of the owner of the motor vehicle, Unifund, must pay the applicants claim. [25] Having received the submissions of counsel regarding the applicability of the decision of the Ontario Court of Appeal in Prasad v. Gan Insurance Company (1997), 33 0.R. (3d) 481 (leave to appeal denied Nov. 20, 1997), I have determined this decision has no effect on the issues before me, because of the presence of the phrase AIn so far as applicable the general provisions, definitions, inclusions and statutory conditions of the policy also apply@ in Section B of the Insurance Act. The decision in Duncan et al v. Mayhew et al (1983), 44 0.R. (2d) 65 is not applicable, as there is no conflict between the wording in the statue and the wording in the policies. Summary: [26] (1) The applicants are not prohibited from claiming their Section B benefits by the Alack of consent@ clause in the policy. (2) The applicants benefits shall be paid by the respondent, Unifund. (3) The applicants shall have their costs to be taxed.

14 Page: 12 December 1, 1997 Matheson J