“This world's a city full of straying streets” (and in this case, highways)
-William Shakespeare and John Fletcher, The Two Noble Kinsmen
Introduction
In the 2023 Decision of Pridmore v. Drenth,[1] the Ontario Court of Appeal illuminates the complex issue of whether the mistaken belief that a highway is a road will operate to vitiate third-party insurance coverage. Specifically, the court clarifies whether this will occur in the context of consent given to a G1 driver to use a vehicle on a mis-identified highway, after which the driver causes injury to a passenger on an entirely different, yet clearly identified highway. In untangling this factual scenario, the Court of Appeal provides insight into when courts will allow relief from forfeiture.
Background
In 2013, Theodore Drenth purchased a small ATV for his son, Tyler Drenth, and a larger one for himself. Tyler only had a G1 class driver’s license. Theodore was the registered owner of both ATVs.
Theodore stored the ATVs in a locked shed, for which only he had they key. Whenever Tyler wanted to drive an ATV by himself, he had to get permission from his father, who would then give him the key to the shed.
The Drenth family property backs onto Central Lane, which they would travel upon or alongside on their ATVs to access the off-road fields and trails that were more properly suited to ATV riding. They would then ride their ATVs back on Central Lane to return to their property.
All parties agreed that Central Lane is a highway as defined by the Highway Traffic Act.[2] However, before the accident, neither Theodore nor Tyler knew that Central Lane was a highway, and they instead erroneously believed it to be an “alley” or a “private laneway.” Theodore knew that holders of a G1 class driver’s license, like his son, Tyler, were prohibited from driving on Ontario highways unless a fully licensed G class driver was seated next to them.
Since Theodore mistakenly believed that Central Lane was a road, and not a highway, he routinely gave his son consent to use an ATV to drive along it to access the off-road fields and trails.
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The Accident
On the day of the accident, a friend asked Tyler if he could use one of his ATV winches to help extricate the friend’s ATV from a muddy field. Tyler asked his father if he could take the larger, more powerful ATV for this purpose, and his father consented.
Tyler first drove the ATV to pick up Breanne Pridmore from her apartment, after which he drove, with Breanne as his passenger, along Central Lane to meet his friend in the field. When he arrived, Tyler helped pull his friend’s ATV from the mud and then they all went to have lunch at the friend’s home. Tyler drank one or two beers at lunch.
The friend stayed at his house while Tyler left, again with Breanne as his passenger, to return home. On the way back, Tyler drove the ATV along the shoulder of Bird Road, a highway. The parties were all aware of Bird Road’s status as a highway according to the Highway Traffic Act.
The weather had turned to “whiteout conditions” by this point. While driving the ATV, Tyler hit a culvert, and Breanne was thrown from the vehicle. She sustained serious injuries, including spinal fractures that resulted in complete paraplegia.
The Highway Traffic Act Convictions
Tyler was convicted of two offences under the Highway Traffic Act. As the holder of a G1 license, he was prohibited from driving a motor vehicle on a highway unless a G class licensed driver was seated next to him. Additionally, as a G1 licensed driver, Tyler was prohibited from driving with a blood alcohol concentration level above zero.
The Policy
At the time of the accident, Tyler’s father had third-party liability coverage of $1,000,000 with Novex Insurance Company (“Novex”). This type of third-party liability coverage generally covers the cost of lawsuits and injuries should the driver get in an accident and injure someone else.
Tyler’s parents were the named insureds on the policy. Tyler was also insured under the same policy when he was driving an ATV with his father’s permission. However, it was clear that Tyler was not entitled to third-party coverage from Novex as a result of his violations of the G1 license conditions.
Novex also denied his father’s own third-party liability coverage, meaning Breanne could not be compensated for her injuries, on the basis that the father was in breach of Statutory Condition 4(1) of the policy, which stated that:
“The insured shall not drive or operate or permit any other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it.”
For the purposes of insurance, ATVs are considered automobiles.
The Coverage Motion
Breanne brought a summary judgement motion, seeking an order to compel Novex to provide the full third-party policy limits available to Tyler’s father, so that she could be compensated for her injuries. The central issue on the Motion was whether Tyler’s father breached Statutory Condition 4(1) of his policy by giving Tyler permission to use the ATV on the day of the accident.
The motion judge applied the reasonable foreseeability test to determine whether the ATV would have been operated in breach of Statutory Condition 4(1) of the insurance policy. In other words, the motion judge asked whether it was reasonably foreseeable that the ATV would have been used contrary to the insurance policy.
The motion judge held that Tyler’s father had given him permission to travel along Central Lane, which was officially designated as a highway, for the purpose of reaching his friend and to return home afterwards.
However, the judge found that since neither Tyler nor his father knew that Central Lane was in reality a highway, the father had therefore not granted Tyler permission to drive on a highway.
He also found that Tyler’s father did not know, nor ought to have known, that Tyler would drive the ATV on any other highway that they both positively knew to be a highway, namely Bird Road.[3]
The motion judge then considered whether the father’s alleged breach of Statutory Condition 4(1), in erroneously allowing Tyler to travel along Central Lane, “tainted” the entire trip.
The motion judge concluded that this alleged breach did not taint the entire trip, because the breach of a statutory condition must be determined at the specific time of the incident and the incident of Tyler striking the culvert occurred on Bird Road, a highway on which Tyler had clearly and obviously not been given permission to drive. Accordingly, the father was not in breach of Statutory Condition 4(1) at the time of the incident.[4]
The motion judge then considered whether relief from forfeiture would have been appropriate if he had concluded that the father’s decision to allow Tyler to drive on Central Lane did taint the entire trip.[5] Relief from forfeiture is a legal concept that means that someone is still entitled to coverage notwithstanding a breach of their insurance policy. In other words, they are relieved from the forfeiting of their coverage.
To make this decision, the motion judge considered the two threshold questions from Kozel v. The Personal Insurance Company:[6]
1) Does the breach here constitute imperfect compliance with a policy term or non-compliance with a condition precedent to coverage?
2) Is relief available under s. 98 of the Courts of Justice Act[7] despite the existence of a specific relief against forfeiture provision in the Insurance Act?[8]
The motion judge concluded that Theodore’s breach of Statutory Condition 4(1) of his insurance policy constituted imperfect compliance with a policy term, instead of non-compliance. He noted that Theodore’s breach was relatively minor because:[9]
- Theodore gave Tyler permission to drive the ATV on Central Lane but on no other highway (in the mistaken belief that Central Lane was not a highway to begin with);
- The distance Tyler was going to travel on Central lane was short; and
- The nature of Central Lane, despite being formally classified as a highway, differs from that of highly traveled highways
He also concluded that relief from forfeiture was available under s. 98 of the Courts of Justice Act, despite s. 129 of the Insurance Act.
The motion judge then proceeded to apply the three-part “relief from forfeiture” test from Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co.[10] He considered:
(1) the reasonableness of the breaching party’s conduct;
(2) the gravity of the breach; and
(3) the disparity between the value of the property forfeited and the damage caused by the breach.
He found that Theodore’s conduct in allowing his son Tyler to drive the ATV on Central Lane was solely for the purpose of travelling from his home to the fields and trails, which was a reasonable position.
The motion judge also found that the gravity of the breach was minor because Central Lane was such an infrequently travelled highway.
He concluded his analysis by accepting Novex’s concession that Breanne had already satisfied the third part of the test.
Therefore, the motion judge granted Breanne’s motion and held that Tyler’s father was entitled to the third-party coverage necessary to compensate Breanne for her injuries. He also held that even if Tyler’s father had breached his insurance policy and tainted the entire trip, relief from forfeiture was wholly warranted.
The Court of Appeal
Novex appealed the motion judge’s decision, and advanced three grounds of appeal. It claimed the motion judge erred:
- In finding that Theodore did not give Tyler permission to drive on highways
- In finding that Theodore was entitled to coverage despite having breached Statutory Condition 4(1) of his insurance policy and section 1.4.5 of the standard Ontario Automobile Policy; and
- By alternatively granting Theodore relief from forfeiture
The parties agreed that the above issues were to be determined according to the “palpable and overriding error” standard of review. The Court of Appeal quickly disposed of issues 1 and 2 together, noting that the motion judge correctly applied and analyzed the law. Similarly, the Court of Appeal swiftly concluded that there was no basis to interfere with the motion judge’s decision to grant relief from forfeiture in the alternative. The Court of Appeal completely agreed with the motion judge’s reasoning on all issues.
Conclusion and Takeaway
The Court of Appeal dismissed Novex’s appeal, upheld the decision of the motion judge, and awarded costs to the respondent, Breanne.
Although the law is often accused of being rigid and unkind, particularly in the insurance context, the Court of Appeal’s decision acknowledges the all too human propensity for mistakes. Theodore Drenth’s mistaken belief that Central Lane was a road was not fatal to obtaining his third-party coverage, necessary of course, for the benefit of the injured Breanne Pridmore.
Even if it had been fatal, the Court would have applied relief from forfeiture to ensure that Breanne received compensation for her injuries.
Furthermore, this case stands for the interesting proposition that the provision of consent to drive on a mis-identified highway does not equal consent to drive on all highways, despite Novex’s efforts to establish the contrary.[11]
Both plaintiff-side and insurance defence lawyers should thus be on the lookout for road classification errors in their cases, as the circumstances of these errors can be decisive in the litigation of coverage disputes.
[3] Drenth supra note 1 at para 25.
[4] Ibid at paras 26, 28.
[9] Drenth supra note 1 at para 30.
[11] Drenth supra note 1 at para 24.
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