Commercial Vehicle Accidents

In Security National Insurance Company v. Markel Insurance Company, 2012 ONCA 683 (CanLII), the Ontario Court of Appeal considered the appeals of two decisions of the Superior Court of Justice interpreting s. 66(1) of the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, O. Reg. 403/96 (“SABS”), enacted pursuant to the Insurance Act (the “Act”).

Section 66(1) deems certain persons to be named insureds for the purposes of s. 268(2) of the Act, which affects the priority in which insurers are to pay statutory accident benefits under s. 268 of the Act. Section 66, “Company Automobiles and Rental Automobiles”, reads as follows:

(1) An individual who is living and ordinarily present in Ontario shall be deemed for the purpose of this Regulation to be the named insured under the policy insuring an automobile at the time of an accident if, at the time of the accident,

(a) the insured automobile is being made available for the individual’s regular use by a corporation, unincorporated association, partnership, sole proprietorship or other entity;

In two cases with similar facts, two arbitrators reached different conclusions. Those decisions were appealed to the Superior Court of Justice where Justice Perell upheld one decision and overturned the other.

In Security National Insurance Company v. Markel Insurance Company, Pinnacle Transport Ltd. (“Pinnacle”) operated a transport company. Markel Insurance Company (“Markel”) issued a motor vehicle liability policy to Pinnacle as named insured, which provided coverage for all vehicles owned, registered, leased and/or operated on behalf of the named insured. McKerchar carried on business as a sole proprietorship with the business name “Tidy Scot”. McKerchar bought and paid for a truck from Pinnacle who entered into an Independent Contractor Agreement with Tidy Scot. While vehicle registration shows Duncan R. B. McKerchar/The Tidy Scot as the owner of the vehicle, Pinnacle was listed as the owner on the plate portion of the registration. Consistent with the terms of their agreement, the truck was never used by Tidy Scot for anybody other than Pinnacle. Pinnacle issued a “Professional Driver Manual” setting out the rules and guidelines applicable to drivers.  Pinnacle also assigned pick-ups and deliveries. Pinnacle’s name and logo were affixed to the doors and the rear panel of the truck. Tidy Scot’s $145 bi-weekly insurance payment amounted to approximately $3,770 annually, and Pinnacle deducted this amount from the cheques it issued to Tidy Scot.  Pinnacle recovered the entire cost of the plates from Tidy Scot.

On April 4, 2006, McKerchar was injured when he attempted to jump on to his moving truck, which was being operated by another driver, fell under it and was run over. McKerchar was not a named insured nor a listed driver on the Markel policy of insurance issued to Pinnacle. He claimed statutory accident benefits from Security National Insurance Company (“Security National”), the insurer of his personal use vehicle. Security National paid the statutory accident benefits but instituted a claim that the obligation to pay rested with Markel, the insurer of Pinnacle’s fleet of vehicles.

In Kingsway General Insurance Company v. Gore Mutual Insurance Company, Trowbridge Transport Ltd. (“Trowbridge”) operated a transport company. Kingsway General Insurance Company (“Kingsway General”) issued a fleet policy in favour of Trowbridge as named insured, which provided coverage for all vehicles owned and operated on behalf of the named insured. William Higgs owned a freightliner tractor and worked as a self-employed owner/operator for Trowbridge. He had worked in this capacity since 2002 when he entered into the first of a series of owner/operator agreements between his sole proprietorship, “Bill Higgs & Sons”, and Trowbridge. Trowbridge entered into an Owner/Operator Agreement with Bill Higgs & Sons, dated January 1, 2008. Consistent with the terms of the agreement, Mr. Higgs’/Bill Higgs & Sons’ freightliner tractor was plated in the name of Trowbridge and Trowbridge obtained vehicle insurance from Kingsway General. The freightliner tractor was a scheduled vehicle on the Kingsway General policy and Mr. Higgs was a listed driver but not a named insured on the policy.

In February 2008, Mr. Higgs was injured in an accident while he was driving the freightliner tractor. At the time of the accident, Mr. Higgs was the named insured under an automobile insurance policy issued by Gore Mutual Insurance Company (“Gore Mutual”) for his personal use automobile. After the accident, Mr. Higgs applied to Kingsway General for statutory accident benefits. Kingsway General paid the accident benefits but served Gore Mutual with a notice of dispute between insurers. Kingsway General took the position that Gore Mutual should be the insurer liable to pay the accident benefits. Gore Mutual disagreed.

The Court of Appeal considered two issues:

(1) whether an insured vehicle may be made available for an individual’s regular use by that individual’s sole proprietorship.

(2) whether the Agreements may be construed as creating joint ventures and, if so, does a joint venture constitute an “other entity” within the meaning of s. 66(1) of the SABS?

The Court considered the applicable legislation and jurisprudence including the leading case of Axa Insurance v. Markel Insurance Co. of Canada (Arbitrator Fidler, December 9, 1996), aff’d [1997] O.J. No. 2186 (Gen. Div.) and noted that while a number of decisions have followed Axa Insurance, the question in those cases differed from that before the Court in this case. The arbitrators in those cases had asked whether the sole proprietor had made the vehicle available to the trucking company or whether the trucking company had made the vehicle available to the sole proprietor. They did not ask whether for the purposes of s. 66(1), the sole proprietorship could make the vehicle available to the individual who was the sole proprietor. On this point, the Court of Appeal found that s. 66(1)(a) permits an insured vehicle to be made available for an individual’s regular use by the individual’s sole proprietorship, noting that this is evident from the language of the provision and its legislative purpose.

The Court concluded that the sole proprietorships in both cases regularly made the insured vehicles available to Mr. Higgs and Mr. McKerchar and there was nothing in the parties’ commercial relationships with the trucking companies that precluded such a result.  The Court found both individuals to be deemed insureds for the purposes of s. 66(1) and Markel and Kingsway General to be responsible for payment of their accident benefits.

Given the Court’s decision on the first question, they did not consider the second issue of joint venture.

In our view, the Court of Appeal has taken a practical approach that yields a logical result. As noted by Arbitrator Bialkowski in Kingsway General Insurance Company v. Gore Mutual Insurance Company (one of the two decisions under appeal) the legislative intent of s. 66(1) must have been to make the commercial insurer the insurer with liability priority:

I, like Arbitrator Fidler… am troubled when a truck driver has an accident while operating his truck in the course of transporting goods pursuant to an owner/operator agreement, that he would have to go to his own personal vehicle insurance to claim, when his personal vehicle had nothing to do with the accident.  Insurance premiums are collected on the basis of the particular risk of being insured. The risks of operating a heavy commercial vehicle for distances far in excess of those normally driven by a private automobile should be borne by the insurer insuring the commercial vehicle. Those additional risks would be unknown to the private automobile insurer given the standard information contained in the application for insurance. I am fully satisfied that the legislative intent of Section 66(1)(a) is to have the commercial insurer responsible for accident benefit claims arising from the commercial operation.