DATE:  20050301
DOCKET: C42175

COURT OF APPEAL FOR ONTARIO

MACPHERSON, SHARPE and JURIANSZ JJ.A.

B E T W E E N :
EAMONN P. McENANEY Plaintiff (Appellant)	Allan Marron, for the appellant
- and -
GENERAL ACCIDENT ASSURANCE COMPANY OF CANADA Defendant Respondent	Kieran C. Dickson, for the respondent
Heard:  February 17, 2005

On appeal from the judgment of the Divisional Court dated January 8, 2004.

JURIANSZ J.A.:

[1]               This appeal raises one substantive and one procedural issue. I would decide that relief is not available under s. 129 of the Insurance Act for persons disentitled from certain insurance benefits because they were not authorized by law to drive the automobile involved in the accident.  I would also decide that, given the narrow basis on which leave was allowed, the Divisional Court erred in granting summary judgment against the appellant.

[2]               The appellant, McEnaney, was an insured person under an automobile insurance policy issued by the respondent, General Accident Assurance Company of Canada.  He was driving with an expired driver’s license on September 9, 1995 when he was involved in an accident.  General Accident initially paid income replacement benefits to McEnaney, but then refused to pay him income replacement or loss of earning capacity benefits because of s. 58 (1)(d) of the Statutory Accident Benefits Schedule, O. Reg. 776/93, amended to O.Reg. 304/98 [“SABS”].  Section 58(1)(d) provides that these benefits are not payable to a driver “not authorized by law to drive the automobile” at the time of the accident. [1]

[3]               General Accident brought a motion for summary judgment that was dismissed by the motion judge, without calling on McEnaney. The significance of the fact that McEnaney did not have the opportunity to respond to the motion will become apparent later in these reasons.  The judge found that there were genuine issues of material fact with respect to whether the nature and quality of McEnaney’s acts or omissions were such that he would be entitled to relief from forfeiture under the Insurance Act, R.S.O. 1990, c.I.8.

[4]               Section 129 of the Insurance Act reads:

    129. Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

[5]               Carnwath J. granted leave to appeal to the Divisional Court “…on one sole matter:  Can relief against forfeiture ever be granted for pre-loss activity or failure to act, pursuant to section 129 of the Insurance Act?”  In his reasons Carnwath J. observed that this court’s decision in Pluzak v. Gerling Global (2001), 52 O.R. (3d) 520 “would seem to overrule earlier decisions that held that pre-loss activity or failure to act may be the subject of relief against forfeiture.”

[6]               The Divisional Court allowed General Accident’s appeal and granted summary judgment dismissing McEnaney’s claim.  The Divisional Court found that it was bound by Pluzak.  In Pluzak this court decided that relief from forfeiture under s. 98 of the Courts of Justice Act, R.S.O. 1990, c.C.43, was not available to revive a term life insurance policy that had lapsed because of the failure to pay premiums.  In the course of his reasons, Carthy J.A. commented:

We are here dealing with facts in respect of which there [is] no relief from forfeiture provisions in the Insurance Act.  As noted above, s. 129 provides for relief from forfeiture for lapses in the process of making a claim on a policy after the loss, does not refer to failure to pay premiums, and is not applicable to life insurance.

[7]               While recognizing that this comment was obiter, the Divisional Court considered it binding and concluded that s. 129 was not available to McEnaney.

Section 129

[8]               McEnaney relied on several decisions which have granted relief, under s. 129 of the Insurance Act, where an insured had been driving without a valid driver’s license: Quarrie v. State Farm (1997), 32 O.R. (3d) 421 (Gen. Div.), Henckel v. State Farm (1997), 33 O.R. (3d) 253 (Gen. Div.), and Clark v. Co-operators (1997), 36 O.R. (3d) 779 (Div. Ct.).  He submitted that the Court in Pluzak had not considered the statutory history of s. 129 of the Insurance Act.  He sought to distinguish the cases that have found that s. 129, or its equivalent in other provinces, applies only to conduct within the claims process on the basis that the reasoning in this line of cases was originally grounded on an earlier version of the statutory provision.  Section 179, the equivalent provision in the Insurance Act R.S.O. 1927, c. 222, provided:

In any case where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured, or as to any matter or thing to be done or omitted by the insured after the maturity of the contract, and a consequent forfeiture or avoidance of the insurance, in whole or in part, and the Court deems it inequitable that the insurance should be forfeited or avoided on that ground, the Court may relieve against the forfeiture or avoidance on such terms as it may deem just.  [Emphasis added].

[9]               McEnaney submitted that the replacement of the words “after the maturity of the contract” with the words “with respect to” was intended to broaden the ambit of the provision to apply to matters before the maturity of the contract.  He submitted that s. 129 was at least ambiguous, and as a remedial section should be given an appropriately broad and liberal construction.  He relied on the Supreme Court of Canada’s decision in Falk Bros Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778, at paragraph 17, for the proposition that “the purpose of allowing relief from forfeiture in insurance cases is to prevent hardship to beneficiaries were there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer.”

[10]          Counsel for General Accident submitted that Carthy J.A.’s comment in Pluzak was an accurate statement of the law.  He submitted that the phrase “with respect to the loss” indicated that there must be a loss, and that no act or omission could be “with respect to the loss” unless there was a “loss” already in existence.

[11]          The Supreme Court in Falk Bros. held that the provision in the Saskatchewan legislation, which has identical wording as s. 129, is composed of two phrases. The first applies when there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured. The second applies where there has been imperfect compliance with any other matter or thing to be done or omitted by the insured with respect to the loss. This, however, does not assist McEnaney.

[12]          McEnaney’s claim for relief clearly does not fall within the scope of the first phrase of s. 129 as the statutory condition in question, being authorized by law to drive, is unrelated to the “proof of loss to be given by the insured”.  Therefore, he must rely on the second phrase. The matter or thing done or omitted need not be a statutory condition but still must be “with respect to the loss.”  In this case, McEnaney did not obtain an authorization to drive, as he was required to do.  However, this failure cannot be characterized as being “with respect to the loss.”  The phrase “with respect to” is common enough language. It means “concerning”, “in relation to”, “with regard to”, or “with reference to.” It indicates the matter or thing done or omitted pertains to “the loss.” It is not enough that there is a thing done or omitted and there is a consequent loss of insurance. The thing must be done or omitted “with respect to the loss.”

[13]          An act or omission could conceivably be “with respect to” an anticipated event, and so I find it unnecessary to say, as some cases have, that s. 129 only applies to an act or omission after the loss has occurred.  It is difficult to imagine an act or omission before the loss that would be “with respect to the loss,” and McEnaney did not offer any such example. In this case, I am satisfied that the failure to obtain authority to drive lawfully is a failure to comply with respect to a statutory requirement, but is not with respect to the loss from the accident which occurred some time later.

[14]          I would conclude that the Divisional Court was correct in ruling that relief under s. 129 of the Insurance Act was not available to the appellant.

Dismissal of the Action

[15]          After so ruling, the Divisional Court went on to order that the appellant’s action be dismissed despite his submission that he had other issues to pursue. Before the motion judge, McEnaney had been prepared to rely on s. 98 of the Courts of Justice Act and as well to argue that s. 58(1) (d) of the SABS, properly interpreted in light of the overall policy of the Insurance Act, did not disentitle him from the benefits claimed.  While the motion judge did not refer to these arguments, General Accident submitted that he must have intended to dismiss them, or he would have found it unnecessary to deal with the question of relief under s. 129.  I am not prepared to make that inference as the motion judge did not call upon McEnaney and thus he had no opportunity to advance his arguments on these points.  Moreover, as the only question before the Divisional Court was the availability of relief under s. 129 of the Insurance Act, he did not file argument on these issues in the Divisional Court.

[16]          In any event, it is sufficient to find that the Divisional Court erred by dealing with questions for which no leave to appeal had been granted and therefore were not before it.

[17]          I would dismiss the appeal of the Divisional Court’s finding that relief under s. 129 of the Insurance Act was not available to the appellant.  I would allow the appeal of the Divisional Court’s order dismissing the action.

[18]          As success is divided, I would make no order as to costs of the appeal and the motion for leave to appeal. 

“R.G. Juriansz J.A.”

“I agree J. MacPherson J.A.”

“I agree Robert J. Sharpe J.A.”

RELEASED: March 1, 2005