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Case Summary: Cardinal v Alberta Motor Association Insurance Company
Defence + Indemnity

C. The SEF 44 Endorsement is not a standalone policy and exclusions in the underlying policy apply to it such that a claimant passenger of a stolen vehicle is entitled to benefits if he/she did not know nor ought to have known that the vehicle was stolen.

Cardinal v Alberta Motor Association Insurance Company, 2018 ABCA 69; rev’g 2017 ABQB 487 [4269]

I. FACTS AND ISSUES
 
The plaintiff Cardinal was injured in a single vehicle motor vehicle accident. She was the passenger in a stolen vehicle. There was no evidence as to whether or not she knew that the driver did not have the owner’s consent to possess or operate the vehicle.
 
Cardinal sought coverage under her mother’s SEF 44 Endorsement, but the insurer denied coverage as the vehicle was stolen.
 
The mother’s SPF No. 1 policy contained the following exclusion:

No person shall be entitled to indemnity or payment under this Policy who is an occupant of any automobile which is being used without the consent of the owner thereof [emphasis added by the Court].

However, Art. 2 of the SEF44 Endorsement provided as follows:

INSURING AGREEMENT
… that the Insurer shall indemnify each eligible claimant for the amount that such eligible claimant is legally entitled to recover from an inadequately insured motorist as compensatory damages in respect of bodily injury or death sustained by an insured person by accident arising out of the use or operation of an automobile [emphasis added by the Court].

Also, Art. 11 of the Endorsement provided as follows:

This endorsement is attached to and forms part of the policy and shall be effective from the local time and effective date of the policy or renewal thereof, or if added to the policy during the policy period, from the local time and effective date of the endorsement specifying the addition of this coverage.
 
Except as otherwise provided in this endorsement, all limits, terms, conditions, provisions, definitions and exclusions of the policy shall have full force and effect.

The Master summarily dismissed Cardinal’s case against the insurer. On the appeal in the Court of Queen’s Bench, the Court held that there was a genuine issue to be tried and allowed the appeal, relying on an Ontario amendment to that province’s Insurance Act, to the effect that the Endorsement was ambiguous. A possible interpretation of the policy and Endorsement is that a vehicle occupant who does not know, nor ought to have known, that the vehicle was stolen may be covered. The insurer appealed to the Court of Appeal.
 
II. HELD: For the respondent insurer; appeal allowed and summary dismissal restored.

1.    The Court held that the standard of review on appeal from the Master is correctness.

2.    The Court summarized the principles of insurance policy interpretation:

[11]    If the language of an insurance policy, when read as a whole, is unambiguous, effect should be given to the clear language. If the language is ambiguous, the ambiguity should be resolved through the application of the general rules of construction. If ambiguity remains after application of the general rules, then the policy can be construed against the insurer pursuant to the principle of contra proferentem. Coverage provisions should be construed broadly but exclusions should be construed narrowly: Ledcor v Northbridge, paras 49-51. Automobile insurance policies, including endorsements, are approved by the legislature so there is an element of statutory construction involved in their interpretation. This requires a court to determine the meaning of the policy in its entire context, in its grammatical and ordinary sense harmoniously with the scheme of the legislation, the object of the legislation, and the intention of the legislature: see Sullivan, Sullivan on the Construction of Statutes, 6th ed (Markham, Ont: LexisNexis Canada, 2014) at p. 7; Bell ExpressVu Limited Partnership v Rex, 2002 SCC 42 (CanLII) at para. 26, [2002] 2 SCR 559. An ambiguity requiring the use of rules of construction must be real. That is, the words of the provision must be reasonably capable of more than one meaning having regard to the entire context of the provision: Bell ExpressVu at para. 29.

3.    The Court held that the SEF 44 Endorsement is not a stand-alone policy and is subject to the exclusions set out in the underlying policy. Furthermore, the exclusion regarding vehicles being operated without the owner’s consent was not vague. Ontario authority on point had so held before the Ontario statue was amended to require that the occupant must know, or ought to have known, that there was no owner’s consent. The Chambers judge was held to have erred in relying on the Ontario legislation to determine the intent of the Alberta Legislature, and that a legislative amendment in Alberta would be necessary to support the contrary conclusion:

[15]    The Ontario courts that considered the interpretation of the Ontario exclusion prior to the amendment concluded that the exclusion was clear, unambiguous and did not import a knowledge requirement. That conclusion was reached in the context of both under-insured coverage and coverage similar that provided by the SEF 44. See McCauley (Litigation Guardian of) v Blagdon (2006), 2006 CanLII 51178 (ON SC), 84 OR (3d) 792, 47 CCLI (4th) 204 (Sup Ct), citing Simison (Litigation Guardian of) v Catlyn (2004), 2004 CanLII 22313 (ON CA), 73 OR (3d) 266 (CA) and Coombs v Flavell (1988), 1988 CanLII 4796 (ON CA), 64 OR (2d) 737 (CA); also see Marsden v Dominion of Canada General Insurance Co (1987), 27 CCLI 289 (Ont Dist Ct). It was an error for the chambers judge to suggest that the Ontario amendment could give an indication of legislative intent in Alberta or provide assistance in the interpretation of the unamended Alberta exclusion. Nor can the enactment of an amendment in Ontario give rise to an ambiguity in the unamended Alberta exclusion. The Alberta legislature can make its own assessment as to whether a similar amendment is appropriate in Alberta. In the meantime, the insuring agreements in issue should be interpreted according to the principles discussed above. 
 
[19]   The respondent’s arguments cannot succeed. The SEF 44 is not a stand-alone policy. It attaches to and forms part of the underlying policy. It specifically incorporates the exclusions found in that policy. There is no ambiguity in the incorporating provisions of the endorsement. Nor is there any real ambiguity in the exclusion itself. There is nothing in the language of the exclusion that suggests knowledge may be relevant. Where the legislature intended to incorporate a knowledge requirement into a provision of the endorsement, it did so specifically. For example, s 6.(c) of SEF 44 provides in part:

6.(c)    Every action or proceeding against the Insurer for recovery under this endorsement shall be commenced within 12 months from the date upon which the eligible claimant... knew or ought to have known that the quantum of the claims... exceeded the minimum limits... 

[20]    An ambiguity cannot be created by external means such as reading in an element not present on a plain reading of the provision. As there is no ambiguity, there is no need to resort to interpretation rules such as the reasonable expectations of the parties or contra proferentem to construe the insuring agreements. It is normal for insurance policies to contain exclusions and the fact that some claims are thereby removed from coverage does not, in itself, give rise to unfairness. If claims by persons without knowledge are to be covered, the remedy lies with the legislature, not with the courts. As knowledge is not an element of the exclusion on the plain reading of its terms, there is no need for a trial to determine the extent of the respondent’s knowledge.