Ontario Court of Appeal clarifies insurance coverage rule for passengers of stolen vehicles

The Ontario Court of Appeal has clarified the rule concerning insurance coverage in cases where a person drives a vehicle covered by a standard Ontario Automobile policy without permission or consent of the owner.

In Burnham v. Co-operators General Insurance Company, 2023 ONCA 384, Joshua Burnham was asleep in the back seat of a pickup truck when it collided with a transport truck. The collision killed the pickup truck driver, while Burnham sustained serious injuries. A pickup truck's owner reported that someone stole his vehicle shortly before the accident. Burnham claimed he did not know that the pickup truck was stolen and only found out when he woke up days after the accident.

Burnham brought an action against the uninsured driver of the stolen pickup truck and against Co-operators General Insurance Company, the insurer of the pickup truck. Burnham sought to recover damages caused by the alleged negligent operation of the vehicle under the uninsured automobile coverage provisions of the policy.

Co-operators denied liability, arguing that Burnham knew or ought to have known that the driver was operating the vehicle without the owner's permission. Co-operators further argued an exclusion under s. 1.8.2 of the policy precludes Burnham's claim for uninsured motorist coverage. The exclusion prohibits coverage when a person is driving the vehicle under the policy without permission or consent.

The motion judge ruled in favour of Co-operator and held that Burnham had no cause of action against Co-operators because the exclusion clause precluded his claims. Burnham appealed the motion judge's decision to the Ontario Court of Appeal.

Contested provisions

The Insurance Act mandates uninsured automobile coverage in every motor vehicle liability insurance policy. Section 1.8.2 of the policy states an exclusion entitled, "Excluded Drivers and Driving Without Permission. The court noted that the section includes two paragraphs that appear to exempt certain passengers from the exclusion who "neither know nor ought reasonably to know the vehicle in which they were travelling when injured was driven without permission."

The appeal court noted that the two paragraphs appear to extend coverage to innocent occupants injured in stolen vehicles. The court noted that the first paragraph refers to "the automobile" covered by the policy, while the second paragraph refers to "any automobile."

The central questions on the appeal are which passengers are covered by this exemption and whether Burnham falls into one of the exempted passengers’ categories.

Interpretation advanced by the parties

To explain the policy's ambiguity, the Minister of Public and Business Service Delivery distinguished between "the automobile" referred to in the first paragraph and "an automobile" in the second paragraph. The Minister argued that the reference to "an automobile" means that the policy only protects occupants in any other vehicle, but not "the automobile" covered by the policy.

The Minister said that the policy was amended in 2010, expanding its coverage to innocent passengers in "the automobile" covered by the policy. This interpretation would mean that if Burnham is an innocent passenger in the automobile, he could claim coverage under the vehicle owner's automobile insurance policy issued by the Co-operators. The Minister asserted that the 2010 amendments are intended to ensure plaintiffs in the position of the passenger who does not know the insured vehicle was stolen would be exempt from the exclusion.

On the other hand, Co-operators argued that there is no coverage for any occupant of the vehicle insured under the policy once it is driven without the owner's consent.

Principles of interpretation

The court upheld the interpretation advanced by the Minister. In interpreting the policy, the court applied several principles. First, the court acknowledged that the policy should be read in its entire context and its grammatical and ordinary sense. Second, exclusions in insurance policies are interpreted narrowly. As a rule, the court must grant insurance clauses a literal meaning in favour of the insured, and those clauses excluding coverage must be construed against the insurer. Lastly, the purpose of uninsured automobile coverage is to internalize the cost of driving so that payment is made by insurers rather than the Motor Vehicle Accident Claims Fund.

The court found that the wording of the policy and its legislative history support an interpretation which exempts innocent passengers in a stolen vehicle from the exclusion of coverage. The first paragraph of the policy applied to "the automobile" covered by the policy, while the second paragraph applied to occupants of "any automobile."

The court emphasized that exclusions are to be interpreted and applied narrowly. The court also pointed out that the motion judge should have considered the overall legislative purpose of the policy, which is to internalize the risks associated with driving among insurers.

The court concluded that the interpretation advanced by the Minister is consistent with the legislative intent of the policy to increase insurance coverage for uninsured vehicles and decrease recourse to the fund.