The Question of Coverage for Innocent Passengers in Stolen Vehicles: A Review of the 2023 Ontario Court of Appeal Decision in Burnham v Co-operators General Insurance Company

The Question of Coverage for Innocent Passengers in Stolen Vehicles: A Review of the 2023 Ontario Court of Appeal Decision in Burnham v Co-operators General Insurance Company

By Thomas Russell

Background

On August 25, 2014, Joshua Burnham was asleep in the back of a stolen pickup truck when it was involved in a motor vehicle accident, tragically killing the driver and front-seated passenger of the vehicle.[1] Arising out of this horrible situation was the question of who should cover the damages that Burnham sustained.[2] Two parties were potentially liable to Burnham:[3]

(1) Co-operators General Insurance Company (Co-operators) as the insurer of the pickup truck

(2) The Motor Vehicle Accident Claims Fund (The Fund)

To understand why this was the case requires some brief background information. First, every automobile insurance contract in Ontario is statutorily required to abide by the terms of the Ontario Automobile Policy (The Policy), under the Insurance Act.[4]

Under The Policy, Co-operators was potentially liable to Burnham as a passenger in the insured pickup truck.[5] Co-operators could be liable to Burnham because of something called “uninsured automobile coverage”, which is mandatory under The Policy.[6] The details of uninsured automobile coverage are not especially relevant to the issue in this case. It is enough to know that it presented a problem for Co-operators.

The big question was whether or not Burnham would be excluded from any coverage under The Policy because the pickup truck was stolen.[7] It should be noted that Burnham was adamant he did not know the pickup truck was stolen, and was innocent of any wrongdoing.[8] However, for the purpose of coverage under The Policy, it was not clear that it mattered whether Burnham was actually innocent.[9] If Burnham was found to be excluded from coverage, then The Fund would end up liable to Burnham for his damages.[10]

The Exclusion

The question of whether or not Burnham would be excluded from coverage came down to an exclusion provision in The Policy (Section 1.8.2), which reads as follows:

Section 1.8.2 Excluded Drivers and Driving Without Permission

Except in certain Accident Benefits coverage, there is no coverage (including coverage for occupants) under this policy if the automobile is used or operated by a person in possession of the automobile without the owner’s consent or is driven by a person named as an excluded driver of the automobile policy or a person who, at the time he or she willingly becomes an occupant of an automobile, knows or ought reasonably to know that the automobile is being used or operated by a person in possession of the automobile without the owner’s consent.

Except for certain Accident Benefits coverage, there is no coverage under this policy for a person who, at the time he or she willingly becomes an occupant of an automobile, knows or ought reasonably to know that the automobile is being used or operated by a person in possession of the automobile without the owner’s consent. [Emphasis added]

Section 1.8.2 is difficult to understand, and even the Ontario Court of Appeal acknowledged it has issues.[11] First, both paragraphs seem to extend coverage under the Policy to innocent occupants injured in a stolen vehicle, so it’s not clear why it is repeated.[12] Second, there is no definition provided to help understand the difference between “the automobile” and “an automobile”.[13]

In this case, both Co-operators and The Fund provided two alternative interpretations of Section 1.8.2 which conveniently relieved them of any liability.[14]

The Arguments

The Fund argued that the last section of the first paragraph (the emphasized part) should be interpreted as an exemption to the rule that a passenger in the insured vehicle cannot make a claim under the policy if the vehicle was stolen.[15] This exemption would apply when the passenger has no knowledge and could not reasonably know that the insured vehicle was stolen.[16]

The Fund argued that the second paragraph deals with a different situation where the passenger is in a different vehicle, which is stolen, and which becomes involved in an accident with the insured vehicle.[17]

Under this interpretation, Burnham would not be automatically excluded from coverage under The Policy, and could present evidence that he did not and could not have known that the pickup truck was stolen.[18]

Conversely, Co-operators argued that the first paragraph must be read “disjunctively” such that each clause is an independent exclusion.[19] What this means is that the clause has to be read the following way:[20]

Except for certain Accident Benefits coverage, there is no coverage (including coverage for occupants) under this policy:

I) if the automobile is used or operated by a person in possession of the automobile without the owner’s consent;

OR

II) is driven by a person named as an excluded driver of the automobile policy;

OR

III) a person who, at the time he or she willingly becomes an occupant of an automobile, knows or ought reasonably to know that the automobile is being used or operated by a person in possession of the automobile without the owner’s consent. [Emphasis added]

Under Co-operators’ interpretation, if any of the conditions are met, then the claimant is automatically excluded from coverage under The Policy.[21] Therefore, Burnham would automatically be excluded because the pickup truck was being operated by a person in possession of the automobile without the owner’s consent.

Co-operators’ interpretation ended up winning at the Superior Court of Justice, which declared that Burnham had no cause of action against Co-operators.[22] However, The Fund was not happy with this, and appealed it to the Ontario Court of Appeal.

The Decision

The Court of Appeal began its analysis by laying out the three key principles to guide how The Policy must be interpreted.[23]

The first key principle is that since The Policy is a statutory contract, it must be read in accordance with the principles of statutory interpretation.[24] Namely, it must be read in its entire context and its grammatical and ordinary sense, harmoniously with the scheme of the Act, the object of the Act, and the intention of the legislature.[25]

The second key principle is that exclusions in insurance policies are interpreted narrowly.[26] Exclusions must be interpreted strictly against the insurer and in favour of the insured.[27]

The third key principle is that the purpose of uninsured automobile coverage generally is to allocate payments for the “cost of driving” to insurers rather than The Fund.[28] Without going too into detail, the purpose is to spread out the risk presented by uninsured drivers on the road amongst drivers generally (or more specifically to their insurers) rather than to The Fund (which obtains its money from the tax base).[29]

When the Court of Appeal applied these three key principles to Section 1.8.2, it found that the interpretation from The Fund must be favoured.[30]

The Court of appeal stated that The Fund’s interpretation was more consistent with the text, that it provided a coherent distinction between the two paragraphs in Section 1.8.2, it provided a narrower exclusion, it accorded with the legislative history, and it minimized the impact of uninsured drivers on The Fund.[31]

The Impact

As a result of this decision, it is now open to Burnham to argue that he did not know and could not reasonably know that the pickup truck was stolen. Whether or not he will be successful with that argument is a different question.

That being said, this was an important decision because it provided clarification not only on the interpretation of Section 1.8.2, but also how to interpret The Policy more generally, as well as some guidance to interpreting other statutory contracts.

At this moment, this case has not been appealed to the Supreme Court. Until that time, the three key principles will remain an important guide.

[1] Burnham v Co-Operators General Insurance Company, 2023 ONCA 384 at para 5.

[2] Ibid para 2.

[3] Ibid at para 2.

[4] Ibid at para 15; Insurance Act, R.S.O. 1990, c. I8; https://www.fsrao.ca/oap-1-ontario-automobile-policy-owners-policy.

[5] Burnham, Supra note 1 at para 8.

[6] Ibid at para 8.

[7] Ibid at para 13.

[8] Ibid at para 6.

[9] Ibid at para 17.

[10] Ibid at para 2.

[11] Burnham, Supra note 1 at para 42.

[12] Ibid at para 42.

[13] Ibid.

[14] Ibid paras 26 – 37.

[15] Ibid at paras 33 – 34.

[16] Ibid.

[17] Ibid at para 32.

[18] Burnham, Supra note 1 at para 31.

[19] Ibid at para 36.

[20] ibid.

[21] Ibid.

[22] Ibid at paras 10 – 11.

[23] Ibid at para 43.

[24] Burnham, Supra note 1 at paras 18; 44.

[25] Ibid at para 44.

[26] Ibid at para 45.

[27] Ibid.

[28] Ibid at para 46.

[29] Ibid.

[30] Ibid at para 57.

[31] Ibid.

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