An insured must be fully informed of the implications of an excluded party clause for the clause to be effective

An application by the insurer for a declaration that it had no duty to defend or indemnify the insured and his son was dismissed in part. There was no coverage for the son, as he was an excluded driver under the policy. Although the son was an ‘excluded driver’ under the policy, the evidence did not establish that the insurer took all appropriate steps to make sure that the insured understood the implications of having his son listed as an excluded driver. Therefore, a trial of an issue was directed on the ‘excluded driver’ endorsement. Further, there was also no evidence that the insured’s son drove the car without the insured’s consent or that the insured allowed his son to drive while he was unauthorized by law to do so.

Traders General Insurance Co. v. McCubbin, [2009] O.J. No. 4478, October 28, 2009, Ontario Superior Court of Justice, E.P. Belobaba J.

The insured owned a pick-up truck insured by the insurer. His son was an ‘excluded driver’ under the policy. His son used the truck, accompanied by another driver, and was involved in a motor-vehicle accident. Both the insured and his son were sued by the occupants of the other vehicle.

The insurer brought an application for a declaration that it had no duty to defend or indemnify either the insured or his son. The insurer argued that there was no coverage on three grounds: (1) The son was an ‘excluded driver’; (2) The son drove the truck on public roads without the insured’s consent; and (3) The insured allowed the son to drive while in breach of the conditions on his G-1 driver’s license.

On the first ground, the court agreed that the insurer had no duty to defend or indemnify the son, as he was clearly listed as an ‘excluded driver’. However, the insured argued that he understood this to mean that his son had no coverage, not that he was not himself protected from third party liability. The court questioned whether the insurer had taken adequate steps to bring the coverage implications to the insured’s attention. The form that was originally sent to the insured, clearly explaining the implications of having an excluded driver on the policy, only listed another vehicle owned by the insured, not the truck in question. Although the insurer sent a revised form, listing the truck, the insured had left the country and claimed he did not receive it prior to the accident. Since the evidence was unclear, the court was not prepared to make a finding on the evidence that the insurer had taken all the appropriate steps to ensure the insured fully understood the coverage implications of having his son listed as an ‘excluded driver’. The court directed the trial of an issue on the ‘excluded driver’ endorsement.

On the second ground, the court found that although both the insured and his son had sworn affidavits that the son did not have express consent to drive the vehicle, he did have implied consent. Email evidence suggested that when the insured found out that his son was using the truck on some public roads, he simply told his son to “be careful.”  The court found that, at the very least, the insured had acqueised and had impliedly consented to his son using the truck on public roads.

On the third ground, the court found that the insured did not allow his son to drive while unauthorized to do so. The son had his G-1 license, which required him to have another driver in the vehicle with more than four years driving experience. At the time of the incident there was another driver with the son, but he had less than the requisite experience. The court found that it could not be stated that the insured allowed his son to drive his truck in breach of the licensing requirements since he could not have known that his son’s passenger lacked the requisite experience.

The court directed a trial of an issue under Rule 38.10(1)(b) with regard to the coverage implications of the ‘excluded driver’ endorsement in relation to the insured. It also declared that the son was not covered and that the insurer had no duty to defend or indemnify him in the upcoming actions.

This case was originally summarized by Natasha D. Morley and originally edited by David W. Pilley.

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