It is a common occurrence that parents will give their children consent to drive their vehicles and/or include them as listed drivers under motor vehicle insurance policies. Unfortunately, issues of the timing and nature of that consent can loom large when accidents happen and can be the basis for insurance coverage denials.
In Pridmore v Drenth, 2023 ONCA 606, the Court of Appeal for Ontario considered whether the timing of a breach of a statutory condition by a vehicle’s owner precluded coverage where the owner provided a specific and limited form of consent to the driver of the vehicle which the driver did not comply with.
Background
The plaintiff was a passenger on an all terrain vehicle (“ATV”) driven by the defendant, Tyler Drenth, and owned by his father and defendant, Theodore Drenth. While driving on the shoulder of a highway, Bird Road, in rural Dunnville, Ontario, the plaintiff was thrown from the ATV and suffered serious injuries, including complete paraplegia. Tyler had a G1 license and had consumed alcohol prior to driving the ATV. A G1 licensed driver is prohibited from driving a motor vehicle on a highway unless accompanied by a G licensed driver and must have a blood alcohol concentration level of zero while driving on a highway.
The ATV was insured by Novex, and Tyler was insured under the policy if he drove the ATV with his father’s consent. On the date in question, Tyler had his father’s consent to drive the ATV. The evidence confirmed that Theodore regularly provided Tyler with consent to drive the ATV on a road, Central Lane, for a short distance but that prior to the accident, both Theodore and Tyler believed that Central Lane was not a highway, but an alley or private laneway.
While it was common ground that Tyler was not entitled to coverage due to a breach of Statutory Condition 4(1) and the consumption of alcohol, the summary judgment motion and appeal concerned whether Theodore was entitled to coverage or whether he was in breach of the statutory condition for granting Tyler permission to operate the ATV on Central Lane. Statutory Condition 4(1) states 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.
The motion judge found that Theodore was entitled to coverage. The motion judge held that Theodore granted Tyler consent to drive on only one highway, Central Lane, for the limited and brief purpose of travelling from their residence to the nearby fields and trails. Importantly, the motion judge held that since both Tyler and Theodore were operating under the mistaken belief that Central Lane was not a highway, Theodore had not granted Tyler permission to drive on a highway. The motion judge also held that Theodore did not know and had no reason to know Tyler would drive on any highway other than Central Lane.
Accordingly, Theodore’s breach of Statutory Condition 4(1) did not taint the entire trip, as a breach of statutory condition must occur at the time of an accident in order to ground a coverage denial. If the accident had occurred on Central Lane, or if Theodore knew or ought to have known that Tyler would drive the ATV on a highway other than Central Lane or that he was going to drive after consuming alcohol, Theodore would not have been afforded coverage. However, since the accident occurred on a highway on which Tyler had not been permitted to drive, Theodore was not in breach of Statutory Condition 4(1) at the time of the accident.
In the alternative, the motion judge held that if Theodore was in breach of Statutory Condition 4(1) at the time of the accident, he would have granted relief from forfeiture.
The Court of Appeal Decision
The Court of Appeal for Ontario upheld the decision. In doing so, the court agreed with the parties that the applicable standard of review was palpable and overriding error. As stated by the Court of Appeal for Ontario, “The motion judge applied the correct legal principles in determining whether Theodore was in breach of SC 4(1) at the time of the accident. In my view, the motion judge’s findings are not ‘clearly wrong’ nor are they ‘unsupported by the evidence.’”
The Court of Appeal for Ontario (Gillese, JA writing for the panel) agreed with the motion judge’s factual findings that although Theodore was in breach of Statutory Condition 4(1) by permitting Tyler to drive on Central Lane, he could only be disentitled to coverage if the breach tainted the entire trip, including at the time the accident occurred. Justice Gillese stated that “On the day in question, Theodore gave Tyler clear and specific permission to: drive the ATV to the fields by means of Central Lane; assist his friend in extricating his ATV that was stuck in the mud; and then return home following the same path.” Since Tyler was not driving on Central Lane at the time of the accident, Theodore did not give Tyler consent to drive on any other highway, and Theodore did not know and ought not to have known that Tyler would drive on any other highway; Theodore was entitled to coverage.
The court also upheld the alternative finding that Theodore would have been entitled to relief from forfeiture because his breach constituted imperfect compliance with a policy term rather than non-compliance, and the three-part test from Kozel v The Personal Insurance Company, 2014 ONCA 130 was met. The three factors to be considered are: (1) the reasonableness of the breaching parties’ 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. The first and second factors were met because of the limited and specific nature of the consent given by Theodore to Tyler and the minor nature of Theodore’s breach, given the difference in nature between Central Lane and a highly travelled highway. Novex had conceded that the third factor was met given the nature of the plaintiff’s injuries and that Theodore stood to lose $1,000,000 in insurance coverage.
Conclusion
It is important to highlight that in this case, the parties agreed, and the court accepted, that the standard of review was that of palpable and overriding error on a mixed question of fact and law. The parties agreed on the applicable law but disagreed on the motion judge’s factual findings and application of those findings to the law. However, as the Court of Appeal for Ontario found that the motion judge referred to correct legal principles and that he gave “compelling reasons” that were “far more than adequate,” there was no basis for appellate intervention.
The decision in Pridmore demonstrates the importance of the facts in coverage determinations. In cases such as this, the nature and scope of the consent given to a driver to operate a vehicle and the timing of the breach of any statutory condition will be key to this determination.
