Insurance law – Automobile insurance – Actions – Consent to drive – Valid driver’s licence – Passengers – Contributory negligence – Damages – Evidence – Settlement of action
Caithesan v. Amjad,  O.J. No. 4741, 2016 ONSC 5720, Ontario Superior Court of Justice, September 13, 2016, R. Charney J.
The action arose from a ‘joy riding’ accident. On December 28, 2010, the defendant Amjad and three of his friends decided to take his mother’s vehicle (the “vehicle”), without her permission. It was decided that Amjad would drive, despite his youth, limited experience, and G1 licence. Some time into their journey, Amjad swerved to avoid an animal and lost control of the Vehicle. Two of his passengers, Caithesan and Delina, sustained serious injuries and commenced actions against Amjad and his mother.
The insurer of the vehicle refused to provide coverage. It took the position that it was not required to defend or indemnify Amjad and his mother, because Amjad was operating the Vehicle without permission and in breach of the requirements of his G1 licence. As a result, Caithesan and Delina relied on their own insurers for coverage. Caithesan and Delina’s respective insurers settled these first party claims. They then brought a cross-claim against Amjad, seeking to recover the amounts they had paid in settlement.
The matter proceeded on a summary trial basis. While it was not particularly disputed that Amjad had been negligent, the parties disagreed on contributory negligence and damages.
Amjad, who was unrepresented, argued that the plaintiff passengers were contributorily negligent for urging him to steal the vehicle and for willingly being his passengers. He testified that they knew he was an inexperienced driver and that he did not have his full licence. The Judge disagreed. He found that the plaintiffs’ conduct in convincing and influencing Amjad to take the vehicle did not qualify as contributory negligence. He noted that passengers do not assume risk simply by getting into a motor vehicle, and in any event, Amjad had a legal duty to drive with appropriate care and control, regardless of his level of experience. The Judge further found there was no evidence that the plaintiffs could have reasonably avoided the accident once Amjad began to drive negligently.
With respect to damages, the Judge found that the amount paid in settlement of the first party claims could be used as the quantum of damages. To this point, he cited MacKean v. Royal & Sun Alliance Insurance Company of Canada, 2015 NSCA 33 (“MacKean”), where the Nova Scotia Court of Appeal considered a case in which the insurer settled a motor vehicle claim for its insured and then sought recovery from the defaulting uninsured third party who caused the loss. As in this case, the issue before the court in MacKean was whether the court should assess the insured’s damages independent of the settlement or whether the insurer could rely on evidence of the reasonableness of the settlement. The Court of Appeal concluded that the insurer may proceed by filing sufficient evidence to show that its settlement with the plaintiff was reasonable. It noted that it is unlikely that an insurer would overpay its own insured because of the doubtful prospect of any recovery from the at-fault party. The Court stated (at paras. 30-31 of the MacKean decision):
In terms of its obligation to pay its insured, the insurer has a common interest with the third party wrongdoer in resisting or limiting payment. Conversely, as a subrogated or assignee claimant against the third party, the insurer assumes the position of its insured, seeking to maximize its recovery. But the first precedes the second. Without payment to its insured – which the insurer is motivated to keep as low as reasonably possible – there will be no subrogated action against the wrongdoer.
It is especially unlikely that an insurer would overpay its insured in Section D [uninsured automobile coverage] cases, because of the doubtful prospect of any recovery from the defaulting third party (see for example, Somersall v. Friedman, 2002 SCC 59 (CanLII), para. 71). This circumstance is additional incentive for an insurer to pay no more than it must – i.e. no more than would be reasonable. As well, in limits cases where coverage is almost always exceeded, settlement at the insurance limit is further assurance that the settlement amount is reasonable. All these factors favour the reasonableness of settlement in such cases.
Based on the reasoning in MacKean, the Judge quantified the damages payable by Amjad in accordance with the quantum of the plaintiffs’ respective settlements. He declined to order costs.
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