Background
The plaintiff, Breanne Pridmore, was severely injured riding as a passenger on an all-terrain vehicle (“ATV”) driven by her friend, Tyler Drenth, in March 2014. They were riding along the shoulder of Bird Road, a rural highway road, when she was thrown from the ATV. She suffered complete paraplegia. At the time, Tyler only had a G1 learner’s driver’s licence and had consumed two beers prior to the accident. The ATV belonged to Tyler’s father, Theodore Drenth, who had given Tyler permission to use it. Theodore had $1 million in third party liability coverage through Novex Insurance Company (“Novex”).
Novex denied coverage, claiming Theodore breached Statutory Condition 4(1) (“SC 4(1))”) of the policy by allowing an unlicensed driver, Tyler, to operate the ATV on a highway. SC 4(1) states that the insured shall not permit any person to drive the vehicle unless authorized by law.
The plaintiff brought a summary judgment motion, asking the court to order Novex to provide the full third-party policy limits available to the Drenths. The motions judge concluded that Theodore was entitled to coverage. If he was in breach of the insurance policy, relief from forfeiture was warranted.
Issue On Appeal
Novex appealed and submitted that the motion judge:
- made a palpable and overriding error in finding that Theodore did not give Tyler permission to drive on the shoulders of roads;
- erred in finding that Theodore was entitled to coverage despite having breached SC 4(1) and section 1.4.5 of the standard Ontario automobile policy (the “OAP 1”); and
- erred by, alternatively, granting Theodore relief from forfeiture.
Novex abandoned Issue #2 in oral hearing because it did not raise this issue in the summary judgment motion.
Held
The appeal was dismissed.
Reasons
The Motion Decision
On the day of the accident, Tyler took the ATV along the shoulder of Central Lane, a roadway that backs onto his home, picked up the plaintiff next door, and drove through the fields to a friend’s property to help pull another ATV from some mud. He and the plaintiff had lunch with the friend, where Tyler consumed two beers. The weather conditions deteriorated and on the way back home, Tyler decided to drive on the shoulder of Bird Road. The accident happened on Bird Road.
The motion judge found Theodore allowed Tyler to drive the ATV on Central Lane, believing it was a private road not a highway under the Highway Traffic Act (“HTA”). Each time Tyler drove on Central Lane was a breach of SC 4(1). On the day in question, Tyler breached SC 4(1) by driving on Bird Road after drinking.
The terms of Theodore’s permission to Tyler’s operation of the ATV on the day in question was an important fact to be determined on the motion. The motion judge noted:
- Because Central Lane is a Highway within the meaning of the HTA, each time Tyler drove an ATV on Central Lane, he breached SC 4(1);
- Tyler breached SC 4(1) on the day in question because he was driving on the shoulder of Bird Road after having consumed a beer or two;
- Whether Theodore breached SC 4(1) is a separate question from whether Tyler breached SC 4(1); and
- The breach of SC 4(1) must occur at the time of the incident for coverage to be lost.
The motion judge concluded Theodore’s consent was specific – allowing Tyler to drive from home via trails to unstick a friend’s ATV, not on highways. Though the belief Central Lane was not a highway was mistaken, Theodore did not permit Tyler to drive on highways. Theodore did not know, nor ought to have known, that Tyler would drive on Bird Road.
The motions judge held Theodore’s breach in allowing Tyler to drive on Central Lane did not “taint” the entire trip since the incident occurred on a highway where permission was not granted. Alternatively, relief from forfeiture was warranted considering the reasonableness of Theodore’s conduct, minor nature of the breach, and disparity between the loss and damage caused.
Relief from forfeiture refers to the power of a court to protect a person against the loss of an interest or a right because of a failure to perform a covenant or condition in an agreement or contract (see Kozelv v. The Personal Insurance Company, 2014 ONCA 130 at 28).
Before undertaking a three-part analysis to decide if the court should grant relief from forfeiture, two initial questions must be answered:
- Does the breach here involve imperfect compliance with a policy term or non-compliance with a coverage condition precedent?
- Can relief be given under section 98 of the Courts of Justice Act (“CJA”) despite the existence of a specific relief against forfeiture provision in the Insurance Act?
The judge found Theodore’s breach of SC 4(1) was imperfect compliance rather than non-compliance. The breach was “relatively minor” because:
- Theodore allowed Tyler to drive the ATV on Central Lane but no other road.
- Tyler was only taking it a short distance on Central Lane.
- Central Lane’s nature differed from a busy highway.
The judge determined relief was available under section 98 of the CJA despite section 129 of the Insurance Act.
Next, the court considers these factors:
- The reasonableness of the breaching party’s conduct.
- The seriousness of the breach.
- The difference between the forfeited property’s value and the breach’s damage.
Theodore’s conduct was reasonable since he only let Tyler drive the ATV on Central Lane to go between his home, fields and trails. The breach’s gravity was minor given Central Lane’s nature. For the third factor, the judge accepted Novex’s concession that the plaintiff satisfied it.
The Appeal Decision
The court applied the palpable and overriding error standard of review.
Issues #1 & #2 – Did the motion judge make a palpable and overriding error in finding that Theodore did not give Tyler permission to drive on the shoulders of roads?
The motion judge used the right legal principle to decide if Theodore breached SC 4(1) at the time of the incident. The findings were supported by the evidence so there was no reason for the appeal court to disagree with the motion judge’s decision that Theodore can get third-party coverage.
The motion judge was right in his understanding of the word “permit” in the context of SC 4(1). Permission means “knowledge, intentional ignorance, or at least failing to make reasonable effort to know the relevant facts.” Theodore breached SC 4(1) when he allowed Tyler to drive the ATV on Central Lane, because it is a highway and Tyler only had a G1.
The motion judge was also right in concluding that Theodore’s breach in letting Tyler drive on Central Lane to access fields and return home does not automatically make Theodore lose coverage. Because Theodore did not know or should not have known that Tyler would drive the ATV on a highway other than Central Lane, Theodore did not breach SC 4(1) at the time of the incident.
Issue #3 – Did the motion judge err in granting relief from forfeiture?
Novex’s argument was that the motion judge made factual mistakes. It repeated its claim that Theodore’s breach of SC 4(1) was serious, repeated, ongoing, unfixable, and unreasonably based on ignorance of his responsibilities under the law. The Court of Appeal found no reason to disagree with the motion judge’s findings.
Result
The appeal was dismissed with costs to the respondent.
