Ontario’s “no-fault” regime prohibits all tort actions against a negligent party for recovery of property damage. This prohibition applies not only to claims of individuals, but also to subrogated claims brought by insurers.
Clarendon National Insurance v. Candow, 2007 ONCA 680, Ontario Court of Appeal, J.C. MacPherson, R.J. Sharpe and R.G. Juriansz JJ.A., October 5, 2007
The Plaintiff, a Brampton, Ontario resident, was an owner/operator for an American trucking company located in Texas. As is common with trucks that travel through various jurisdictions, his tractor was insured by double policies of insurance. Clarendon National Insurance provided the physical damage coverage and American Home Assurance provided the liability coverage.
The Plaintiff was involved in a collision on Highway 401 in Toronto. His tractor suffered physical damage and Clarendon, subject to the policy’s deductible, paid for that damage. The Plaintiff and Clarendon commenced an action in Ontario, alleging that the collision was caused by the Defendant’s negligence and sought reimbursement of the amounts paid to repair the tractor, together with interest and costs. The Defendants filed a Statement of Defence claiming that the Plaintiff’s action was barred by s. 263 of the Insurance Act, which replaced the tort system that resolved automobile damage claims prior to its enactment. In the new statutory scheme, insureds can no longer sue the driver whose negligence has caused damage to their vehicles. Rather, their own liability Insurers pay for the damage to the extent that they were not at fault under the third-party liability section of their motor vehicle liability policies. Insureds can recover the at-fault portion of their damage by purchasing collision coverage. Insurers have no right of subrogation for payments to their own insureds but do not have to pay the subrogated claims previously brought by other insurers in the tort system. The net result is that the statutory regime eliminates the transaction costs that were inherent in the tort system.
Two questions arose in this appeal. First, is the Plaintiff entitled to maintain a tort action in negligence against the individual tortfeasor? Second, does the Insurer have a subrogated claim against the individual tortfeasor? In this case, the Plaintiff’s liability Insurer was statutorily required to provide coverage for his property damage. The three criteria of s. 263(1) were met: the Plaintiff’s vehicle suffered damage from an accident in Ontario, his vehicle was insured by an Insurer that had filed an undertaking with the Superintendent, and another vehicle involved in the accident was insured by a domestic Insurer licensed to undertake automobile insurance in Ontario. Consequently, the Plaintiff was entitled to recover for the physical damage to his tractor from his liability Insurer. Because the statutory regime applied, the Plaintiff’s ability to sue in tort was restricted by the provisions of s. 263. The Plaintiff could not maintain a tort action in negligence against the Defendant. The only exception to this general rule permits a right of action where an action is brought “under an agreement, other than a contract of automobile insurance”. It permits an action in contract and does not permit an action in tort. This exception will apply, for example, where a provision of a lease agreement requires that the lessee return the vehicle to the lessor in an undamaged state. Where the lessee failed to do so, the lessor can bring an action against the lessee in contract.
An Insurer’s right to bring a subrogated action is dependent on the existence of a cause of action by the Insured. This is so both under the common law and pursuant to statute. The Court found that s. 263 does not disturb this common law and statutory principle.
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