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Case Summary: Middleton v Pankhurst
Defence + Indemnity

A. In Ontario the Statutory Condition in an auto policy requiring that the driver be “authorized by law” to drive refers to the licensing regime such that breaching driving conditions in a probation order does not render the driver to be unauthorized to by law and does not impact insurance recovery. This is not the case in Alberta.

Middleton v Pankhurst, 2017 ONCA 835, per Hourigan and Roberts, JJ.A. and Nordheimer, J.A. concurring [4249]

Pankhurst and Middleton went ice fishing on January 24, 2009. Pankhurst travelled by snowmobile to meet Middleton at a remote location on the lake.
Pankhurst had a valid class G driver’s licence, not subject to any restrictions. He was subject to a probation order arising from a guilty plea for careless driving. The order prohibited Pankhurst from driving at night and with alcohol in his system.
Pankhurst and Middleton consumed alcohol. Middleton left on foot and became lost. He called Pankhurst, who feared for Mr. Middleton’s safety because of the freezing weather. Pankhurst picked him up and proceeded onto a road. He lost control and hit a telephone pole, causing Middleton to sustain severe injuries.
Middleton and his mother brought a claim against Pankhurst which settled for $900,000. Mr. Pankhurst was insured by Aviva and Middleton’s mother had insurance for under or uninsured claims through her insurer Unifund Assurance.
At issue was whether Mr. Pankhurst was “authorized by law” to drive pursuant to Statutory Condition 4(1) of O. Reg. 777/93 and thus covered by Aviva.
Settlement funds were ordered to be fully paid to the Middletons: half by each insurer. The unsuccessful insurer would repay the successful insurer after the coverage issue was determined.
At trial, the judge found Pankhurst was authorized by law to drive and therefore fell within Aviva’s coverage. Aviva appealed.
II. HELD: Appeal dismissed: Pankhurst authorized by law to drive requiring the defendant’s third party insurer to pay the settlement funds.

1. The trial judge was held not to have erred, having conducted a thorough and careful analysis. The Court agreed with her analysis and conclusion.

2. As the case involved the interpretation of a standard form contract, the standard of review was held to be correctness: Ledcor Construction Ltd v Northbridge Indemnity Insurance Co, 2016 SCC 37.
3. The Court held that legal authority to drive depends upon the existence of a valid licence and the Ministry of Transport regulations and it did not matter that the insured had a probation order related to driving.

a. Contrary to the appellant’s assertion, the case was not distinguishable from Kereluik v Jevco Insurance Company, 2012 ONCA 338, which found that the term “authorized by law” does not to apply to breaches of the law not directly connected with the violations of driver’s licence conditions:

‚Äč20   First, it does not matter that the undertaking in Kereluik was broader in scope than the probation order in the present case. The focus of the analysis is the same for both the undertaking and the probation order, being whether they disqualify a driver under Statutory Condition 4. That was what this court considered in Kereluik. The fact that the undertaking in that case had broader application is of no import.

21   Second, in Kereluik at para. 13, after reviewing a number of authorities on the point, Cronk J.A. concluded, “[t]hese authorities suggest that the legal authority to drive, at any given time, depends on the existence of a valid licence issued by the responsible regulatory authority and compliance with the conditions attaching to the licence.” In other words, the determination of whether an insured is authorized to operate a motor vehicle is restricted to a consideration of any restrictions imposed by the MTO. That finding was necessary for her analysis in that case, and is binding on this court.

22   Finally, if Kereluik is effectively overturned, insurers could potentially deny coverage in any number of situations where there has been a criminal law violation. In considering this result, regard should be had to the historical evolution of Statutory Condition 4. Earlier versions of the Insurance Act prohibited insured individuals from operating an automobile while impaired. This wording was later amended so an innocent third party would not be precluded from receiving compensation for the losses caused by an impaired driver: see Comairco Equipment Ltd. v. Breault (1985), 52 O.R. (2d) 695 (Ont. Dist. Ct.), at paras. 27-28.

23   In my view, such a technical interpretation of Statutory Condition 4 would be contrary to the apparent intention of the legislature in making the amendment, such that any breach of a court order would result in the loss of insurance coverage. As Cronk J.A. stated in Kereluik, at para. 17, “[s]uch a sweeping interpretive result should not be countenanced absent a clear expression of such intention by the legislature.”

4. The Court relied on s. 118 of the Ontario Insurance Act [analogous to s. 533(2) of the Alberta Insurance Act, R.S.A. 2000, c. I-8] to support its conclusion.

a. Section 118 of the Ontario Insurance Act specifically states that a contravention of criminal or any other law does not by that fact alone render indemnity unenforceable. 
b. The Court rejected Aviva’s argument that Pankhurst’s breach of the probation order was not a “contravention of criminal or any other law” within the meaning of s. 118:

25   In the case at bar, the appellant submits that s. 118 is not applicable because Mr. Pankhurst violated a court order and not a statute or any other law. It submits that it is not arguing that there is no coverage by the “fact alone” of a criminal offence. Rather, that as a result of the violation, the insured is not a person authorized by law to operate a motor vehicle pursuant to Statutory Condition 4(1).

26   I would not give effect to these arguments for the following reasons.

27   There is, in my view, no meaningful distinction between a court order and “any criminal or other law in force in Ontario” in this context. Both can operate to restrict the operation of a motor vehicle.

28   More importantly, however, the appellant’s interpretation of s. 118 is inconsistent with the policy objective to provide insurance protection for negligent tortfeasors who do not intend to cause harm, and to their victims. As Cronk J.A. stated in Kereluik, at para. 21:

By enacting s.118 of the Act, by repealing former statutory conditions under the Act that expressly precluded the operation or use of an automobile while under the influence of alcohol (i.e., former Statutory Condition 2(1)(a), above-cited), and by not incorporating a coverage exclusion in the current standard form automobile insurance policy pertaining to drunk drivers, the legislature must be taken as having elected to protect the potential of tort compensation for innocent victims of drinking and driving [ . . . ]

29   If the appellant’s submission were accepted, the policy underlying s.118 would be negated. It would mark a return to a fault based analysis of insurance coverage. A tortfeasor who has not broken the law has coverage, whereas a tortfeasor who has broken the law has no coverage. The problem with this fault based analysis is that it ignores the policy imperative underlying the enactment of s. 118 of ensuring that there is coverage available for the claims of innocent tort victims.

c. The Court held that to allow recovery would not amount to disrespect of a court order. There are other legal consequences for breaching a court order:

32   There is nothing in the trial judge’s reasons to suggest that court orders should not be respected nor is that the consequence of her decision. What is in issue on this appeal is whether the breach of such an order should operate to restrict the availability of insurance coverage. That analysis does not impact the effectiveness of court orders, as there is no conflict between the proper interpretation of Statutory Condition 4 and the proper operation of court orders.


This would not be the result in Alberta. Whereas Ontario Statutory Condition 4(1) requires that the driver be “authorized by law” to drive, Alberta Statutory Condition 2(1) is much broader. Alberta S.C. 2(1)(b) provides that the driver must be “authorized by law” to drive and his/her driver’s licence must not be suspended or subject to a driving prohibition order “of any court”. Thus, Pankhurst would not have succeeded if this case had been governed by Alberta law.