Somersall v. Friedman et al., (2002) 292 N.R. 1 (SCC)

JudgeMcLachlin, C.J.C., L'Heureux-Dubé, Gonthier, Iacobucci, Major, Binnie and LeBel, JJ.
CourtSupreme Court (Canada)
Case DateJanuary 21, 2002
JurisdictionCanada (Federal)
Citations(2002), 292 N.R. 1 (SCC);2002 SCC 59;[2002] RRA 679;JE 2002-1464;163 OAC 201;292 NR 1;115 ACWS (3d) 695;25 MVR (4th) 1;215 DLR (4th) 577;[2002] 3 SCR 109;39 CCLI (3d) 1;[2002] ACS no 60;[2002] CarswellOnt 2550;[2002] SCJ No 60 (QL)

Somersall v. Friedman (2002), 292 N.R. 1 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

....................

Temp. Cite: [2002] N.R. TBEd. AU.001

Scottish & York Insurance Co. Ltd. (appellant) v. Pearl Somersall, Gwendolyn Somersall and Janice Somersall (respondents)

(27851; 2002 SCC 59; 2002 CSC 59)

Indexed As: Somersall v. Friedman et al.

Supreme Court of Canada

McLachlin, C.J.C., L'Heureux-Dubé, Gonthier, Iacobucci, Major, Binnie and LeBel, JJ.

August 8, 2002.

Summary:

The plaintiffs sued Friedman for damages arising from a car accident. The plaintiffs entered into a "Limits Agreement" with Friedman, which provided that Friedman would admit liability for the accident and the plaintiffs would not claim against Friedman or his insurer in excess of Friedman's policy limit of $200,000. The plaintiffs joined their insurer (Scottish & York Insurance Co.) to the action and sought to recover the remain­der of their damages from Scottish & York pursuant to the underinsured motorist cover­age in their SEF 44 Endorsement. Scottish & York moved for a determination of a ques­tion of law with respect to whether the Limits Agreement precluded the plaintiffs from advancing a claim against Scottish & York pursuant to the underinsured motorist provisions of its policy.

The Ontario Court (General Division), in a decision reported at 66 O.T.C. 386, held that the Limits Agreement precluded the plain­tiffs' claim against Scottish & York. The plaintiffs appealed.

The Ontario Court of Appeal, in a decision reported at 129 O.A.C. 68, allowed the appeal, holding that the Limits Agreement did not preclude the plaintiffs from advanc­ing a claim against Scottish & York pursuant to the underinsured motorist provisions of its policy. Scottish & York appealed.

The Supreme Court of Canada, Binnie and Major, JJ., dissenting, dismissed the appeal. The plaintiffs were entitled to pursue their action against Scottish & York for recovery under their SEF 44 Endorsement, notwith­standing the Limits Agreement.

Insurance - Topic 1861

The insurance contract - Interpretation of contract - Contra proferentem rule - Am­biguity construed against insurer - [See Insurance - Topic 2904 ].

Insurance - Topic 2897

Subrogation - Action by insurer - Bars - Settlement or release by insured - Section 278(6) of the Insurance Act provided that "A settlement or release given before or after an action is brought does not bar the rights of the insured or the insurer, as the case may be, unless they have concurred therein" - The Supreme Court of Canada held that s. 278(6) had to be read in light of the other provisions of s. 278 which governed the subrogation rights of insurers and that s. 278(6) could not assist an insurer who had not made any payment or assumed any liability to pay as required by s. 278(1) of the Act - Section 278(6) was intended to protect the interests of an insurer who had paid or assumed liability for payment to an insured - It did not limit the ability to settle an action of a plaintiff who had not claimed against the insurer - See paragraphs 75 and 133 to 136.

Insurance - Topic 2904

Subrogation - Interference with insurer's subrogation rights - The plaintiffs sued Friedman for damages arising from a car accident - The plaintiffs entered into a "Limits Agreement" with Friedman, which provided that Friedman would admit liabil­ity and the plaintiffs would not claim against Friedman or his insurer in excess of Friedman's policy limit of $200,000 - The plaintiffs claimed against their insurer, seeking to recover the remainder of their damages pursuant to the underinsured motorist coverage in their SEF 44 En­dorsement - The insurer argued that the plaintiffs' interference with the insurer's rights of subrogation as set out in the SEF 44 Endorsement amounted to a breach of contract - The Supreme Court of Canada held that the plain language of the insur­ance contract did not support a finding that the Limits Agreement interfered with a contractual right of the insurer - Any doubt over that point would be dispelled by the contra proferentem principle - The court's interpretation was also sound and equitable public policy - See paragraphs 43 to 74.

Insurance - Topic 5187

Automobile insurance - Compulsory gov­ernment schemes - Uninsured or underinsured motorist coverage - Require­ment of "legally entitled to recover" - The plaintiffs sued Friedman for damages arising from a car accident - The plaintiffs entered into a "Limits Agreement" with Friedman, which provided that Friedman would admit liability and the plaintiffs would not claim against Friedman or his insurer in excess of Friedman's policy limit of $200,000 - The plaintiffs claimed against their insurer seeking to recover the remainder of their damages pursuant to the underinsured motorist coverage in their SEF 44 Endorsement - The SEF 44 En­dorsement provided that the insurer would indemnify each eligible claimant for the amount that such eligible claimant "is legally entitled to recover" from an inad­equately insured motorist - The Supreme Court of Canada held that the relevant time for the determination of whether an insured was "legally entitled to recover" was the time of the accident - Accordingly, the Limits Agreement, which did not exist at the time of the accident and had no bear­ing on the plaintiffs' rights against Friedman at the time of the accident, did not preclude the plaintiffs' claim against their insurer - See paragraphs 21 to 42.

Words and Phrases

Legally entitled to recover - The Supreme Court of Canada considered the meaning of the phrase "legally entitled to recover" in the context of an SEF 44 Endorsement in an insurance policy - See paragraphs 21 to 37.

Cases Noticed:

Johnson et al. v. Wunderlich et al. (1986), 18 O.A.C. 89; 57 O.R.(2d) 600 (C.A.), consd. [para. 9].

Chambo v. Musseau (1993), 65 O.A.C. 291; 15 O.R.(3d) 305 (C.A.), consd. [para. 9].

Burns v. Wellington Insurance Co. (1994), 68 O.A.C. 196; 16 O.R.(3d) 569 (C.A.), refd to. [para. 9].

Burns v. Ferri - see Burns v. Wellington Insurance Co.

Fogarty v. Co-operators Group Ltd., [1990] I.L.R. 1-2545; 102 A.R. 270 (Q.B.), dist. [para. 14].

Nielsen v. Co-operators General Insurance Co. (1997), 209 A.R. 177; 160 W.A.C. 177 (C.A.), dist. [para. 14].

Métropolitaine (La), compagnie d'assur­ance-vie v. Frenette, Hôpital Jean-Talon et un autre, [1992] 1 S.C.R. 647; 134 N.R. 169; 46 Q.A.C. 161; 89 D.L.R.(4th) 653, refd to. [para. 16].

University of Saskatchewan v. Fireman's Funds Insurance Co. of Canada et al., [1998] I.L.R. I-3548; 158 Sask.R. 223; 153 W.A.C. 223 (C.A.), refd to. [para. 16].

Kraeker Estate v. Insurance Corp. of Brit­ish Columbia and Schaefer (1992), 14 B.C.A.C. 299; 26 W.A.C. 299; 93 D.L.R.(4th) 431 (C.A.), dist. [para. 33].

State Farm Mutual Automobile Insurance Co. v. Griffin (1973), 286 So.2d 302 (Ala. Civ. App.), refd to. [para. 35].

Rhault v. Tsagarakos (1973), 361 F. Supp. 202 (D. Vt.), refd to. [para. 35].

DeLuca v. Motor Vehicle Accident In­dem­nification Corp. (1966), 215 N.E.2d 482 (N.Y.), consd. [para. 35].

Wheeless v. St. Paul Fire and Marine Insurance Co. (1971), 181 S.E.2d 144 (N.C. Ct. App.), consd. [para. 35].

Glover v. Tennessee Farmers Mutual In­surance Co. (1971), 468 S.W.2d 727, refd to. [para. 35].

Conteh v. Allstate Insurance Co. (2001), 782 A.2d 748 (D.C.), refd to. [para. 35].

Scalera v. Lloyd's of London, [2000] 1 S.C.R. 551; 253 N.R. 1; 135 B.C.A.C. 161; 221 W.A.C. 161, refd to. [para. 47].

Derksen et al. v. 539938 Ontario Ltd. et al. (2001), 277 N.R. 82; 153 O.A.C. 310 (S.C.C.), refd to. [para. 47].

July v. Neal and Home Insurance Co. (1986), 17 O.A.C. 390; 57 O.R.(2d) 129 (C.A.), refd to. [para. 47].

Castellain v. Preston (1883), 11 Q.B.D. 380 (C.A.), refd to. [para. 50].

A.F.G. Insurances Ltd. v. Brighton (City) (1972), 126 C.L.R. 655 (H.C. Aust.), refd to. [para. 50].

Pacific Coyle Navigation Co. v. Ruby General Insurance Co. (1954), 12 W.W.R.(N.S.) 715 (B.C.S.C.), refd to. [para. 53].

Ontario Health Insurance Plan v. United States Fidelity and Guaranty Co. (1989), 68 O.R.(2d) 190 (C.A.), refd to. [para. 53].

Confederation Life Insurance Co. v. Caus­ton (1989), 38 C.C.L.I. 1 (B.C.C.A.), refd to. [para. 53].

Globe & Rutgers Fire Insurance Co. v. Truedell, [1927] 2 D.L.R. 659; 60 O.L.R. 227 (C.A.), refd to. [para. 53].

Commercial Union Assurance Co. v. Lister (1874), L.R. 9 Ch. App. 483, refd to. [para. 54].

Beausoleil et al. v. Canadian General In­surance Co. et al. (1992), 55 O.A.C. 383; 8 O.R.(3d) 754 (C.A.), refd to. [para. 67].

Puckett v. Liberty Mutual Insurance Co. (1971), 477 S.W.2d 811 (Kt. Ct. App.), refd to. [para. 71].

Sahloff v. Western Casualty & Surety Co. (1969), 171 N.W.2d 914 (Wis.), refd to. [para. 71].

Guardian Assurance Co. v. Chicoutimi (Town) (1915), 51 S.C.R. 562, refd to. [para. 78].

Simpson v. Thomson (1877), 3 App. Cas. 279 (H.L.), refd to. [para. 78].

Ledingham v. Minister of Transport, [1975] 1 S.C.R. 332; 2 N.R. 32, refd to. [para. 97].

Glynn v. Scottish Union & National Insur­ance Co., [1963] 1 O.R. 599 (H.C.), affd. [1963] 2 O.R. 705 (C.A.), refd to. [para. 104].

Edwards (John) & Co. v. Motor Union Insurance Co., [1922] 2 K.B. 249, refd to. [para. 108].

Hobbs v. Marlowe, [1978] A.C. 16 (H.L.), refd to. [para. 108].

Colonial Furniture Co. (Ottawa) v. Tanner (Saul) Realty Ltd. et al. (2001), 140 O.A.C. 384; 52 O.R.(3d) 539 (C.A.), refd to. [para. 108].

Napier and Ettrick (Lord) et al. v. Kershaw (R.F.) Ltd. et al., [1993] A.C. 713; 148 N.R. 81 (H.L.), refd to. [para. 108].

Napier v. Hunter - see Napier and Ettrick (Lord) et al. v. Kershaw (R.F.) Ltd. et al.

Birtles v. Dominion of Canada General Insurance Co. (1986), 72 A.R. 47; 46 Alta. L.R.(2d) 193 (C.A.), refd to. [para. 120].

Barton v. Aitchison (1982), 39 O.R.(2d) 282 (C.A.), refd to. [para. 122].

Pitts Insurance Co., Re (1982), 44 C.B.R.(N.S.) 133 (Ont. C.A.), refd to. [para. 122].

Transnational Insurance Co. v. Simmons (1973), 507 P.2d 693 (Ariz. Ct. App.), refd to. [para. 132].

Allstate Insurance Co. v. Skeeters (1988), 846 F.2d 932 (4th Cir.), refd to. [para. 132].

Biafore v. Bates-Pasis Leasing Inc. (1976), 11 O.R.(2d) 409 (Div. Ct.), refd to. [para. 134].

Toronto Hydro-Electric Commissioners v. Budget Car Rental Toronto (1983), 43 O.R.(2d) 539 (Co. Ct.), refd to. [para. 135].

Burns v. Wellington Insurance Co. (1992), 8 O.R.(3d) 11 (Gen. Div.), revd. (1994), 68 O.A.C. 196; 16 O.R.(3d) 569 (C.A.), refd to. [para. 134].

Statutes Noticed:

Insurance Act, R.S.O. 1990, c. I-8, sect. 278(1), sect. 278(6) [para. 7].

Authors and Works Noticed:

Birds, John and Hird, Norma J., Modern Insurance Law (5th Ed. 2001), pp. 289, 290 [para. 50].

Brown, Craig, Insurance Law in Canada (Looseleaf), vol. 1, pp. 13-1 [para. 50]; 13-30, para. 13.7 [para. 71].

Halsbury's Laws of England (3rd Ed. 1952), vol. 22, pp. 180, 181 [para. 104].

Ivamy, E.R. Hardy, General Principles of Insurance Law (6th Ed. 1993), p. 494 [para. 50].

Jerry, Robert H., Understanding Insurance Law (2nd Ed. 1996), p. 602 [para. 50].

MacGillivray on Insurance Law (9th Ed. 1997), p. 531 [para. 50]; 542, para. 22-28 [para. 118].

Ytreberg, Dag A., Insured's Right to Bring Direct Action Against Insurer for Underinsured Motorist Benefits (1976), 73 A.L.R.(3d) 632, §§1[a] [para. 34]; 8[b], 9 [para. 35].

Counsel:

Brian J. E. Brock, Q.C., and Rita Bam­bers, for the appellant.

Jeffrey W. Strype, for the respondents.

Solicitors of Record:

Dutton, Brock, MacIntyre & Collier, Toronto, Ontario, for the appellant.

Falconeri Strype, Toronto, Ontario, for the respondents.

This appeal was heard on January 21, 2002, before McLachlin, C.J.C., L'Heureux-Dubé, Gonthier, Iacobucci, Major, Binnie and LeBel, JJ., of the Supreme Court of Canada. The judgment of the Supreme Court was delivered in both official languages on August 8, 2002, including the following opinions:

Iacobucci, J., (McLachlin, C.J.C., L'Heureux-Dubé, Gonthier and Lebel, JJ., concurring) - see paragraphs 1 to 77;

Binnie, J., dissenting (Major, J., concur­ring) - see paragraphs 78 to 139.

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