All three judges agreed that the non-renewal notice issued by Elite did not comply with the requirements of the provincial Insurance Act.
However, two of the judges concluded that based on a “contextual reading” of the statute and the facts in the case, the policy was not in effect at the time of the accident.
Section 236(5) of the act says that “a contract of insurance is in force until there is compliance” with the other subsections, which includes requirements to do with non-renewal of a policy.
This section, however, “is not exhaustive as to what happens to a policy, irrespective of what else might have transpired between the insurer and insured, in any situation where there has been a defective notice of non-renewal.
“There is no question that an insurance policy may come to an end, other than by an insurer’s notice of non-renewal,” wrote Justice Katherine van Rensburg, with Justice David Paciocco concurring.
The majority of the panel overturned the decision of Superior Court Justice Peter Cavanagh and concluded that the province’s Motor Vehicle Accident Claims Fund was responsible for paying out benefits and not Elite.
Eric Grossman, who represented the insurance company at the Court of Appeal, says that, if the context behind any non-renewal dispute is ignored, it could result in an unfair obligation for insurers.
“The provision, if taken literally, does give rise to a perpetual policy. The notion that you pay a premium for a finite period goes by the boards,” says Grossman, a partner at Zarek Taylor Grossman Hanrahan LLP in Toronto.
The province, says Grossman, has indicated that it will seek leave to the Supreme Court to appeal the decision. Marie Sydney, an outside lawyer who acted for the Ministry of Finance in the proceeding, did not respond to requests for comment.
The case before the Court of Appeal stemmed from a December 2011 accident, where Arpad Vadasz was struck in a parking lot.
The driver fled the scene in his vehicle. More than a year before the incident, there were communications between Vadasz and Elite, which indicated that he had failed to register for its Autograph program and that it was cancelling his policy. He then obtained a policy from another insurer, which he cancelled a short time later.
The province paid out accident benefits, but it argued that Elite’s policy had remained in effect because its cancellation did not comply with the requirements of the relevant sections of the Insurance Act.
An arbitrator, selected by both parties, agreed that the notice of non-renewal was invalid. But he disagreed that this would cause the policy to continue indefinitely, because the facts showed a “mutual intention” to terminate the agreement.
Cavanagh, in his ruling issued in July 2017, overturned the arbitrator and found that he failed to give effect to “the clear words of section 236 (5),” in his decision.
“In my view, the words of s. 236(5) of the Insurance Act, when read in the context of provisions addressing termination or non-renewal of contracts of insurance, and when given their grammatical and ordinary sense harmoniously with the scheme of the Insurance Act, mean what they say: that a contract of insurance is in force until there is compliance with ss. 236 (1), (2) and (3). Subsection 236(5), in my view, clearly displaces the common law principles applicable to renewals of lapsed contracts,” wrote Cavanagh.
The ruling of justices van Rensburg and Paciocco concluded that decisions of the arbitrator on the non-renewal issue and that the policy was not in force at the time of the accident were reasonable and should be given deference.
“The decision does not ignore the relevant statutory provisions. Rather, it takes them into account together with the factual circumstances of the case, and arrives at what I consider to be a reasonable result,” they said.
“The issue here turns on the scope and meaning to be given to s. 236(5) of the Insurance Act, which provides that ‘[a] contract of insurance is in force until there is compliance with subsections (1), (2) and (3),’ and its application to the facts of this case,” they added.
Howard Borlack, a civil litigator and founding partner at McCague Borlack LLP in Toronto, says the majority looked at the dispute from a practical perspective.
“What they latched on to was the intentions of the parties. The insured person took out a policy from someone else,” says Borlack.
“In a slightly different fact situation, the results could be different. But as long as there is a reasonable interpretation, deference has to be paid to arbitrators,” he adds.
The dissent by Justice Gladys Pardu focused more on broader policy concerns, Borlack says.
Pardu agreed with the Superior Court that the findings of the arbitrator should not stand. “The decision of the arbitrator was unreasonable because he failed to give effect to the statutory language, failed to consider legislative purposes, and adopted an interpretation that has no logical connection to the statutory language,” Pardu stated.
“Interpreting s. 236(5) as requiring that a contract of insurance remain in force until there is compliance with the notice requirements is consistent with the objective of providing some certainty as to when a policy is in force. It is also consistent with that objective to make the insurer responsible for compliance with the statutory conditions for non-renewal or its termination of a policy, as an insurer has control over the steps required to initiate and complete that process,” she wrote.
She also said that “the arbitrator failed to give effect to the plain language of the section.”
“He did not consider the purposes of the legislation, and did not consider the effects on persons who were not parties to the contract. His application of the notion of repudiation was flawed, as there was no communication of acceptance of repudiation by another contracting party,” she said.
Grossman says he understands the policy issues put forward in the dissenting ruling, but he says the facts of this case favour the insurer.
“It would be closer to the line if the accident were days or even weeks later” after the defective notice of non-renewal was sent, he says.
As well, Grossman says he believes his client did comply with the non-renewal provisions and will put that argument forward if leave is granted by the Supreme Court.