Wawanesa Mutual Insurance Co. v. S.C. Construction Ltd.,  O.J. No. 316, January 26, 2012, Ontario Superior Court of Justice, E.P. Belobaba J.
An application for a declaration that statutory conditions of a policy of insurance had been breached and for a declaration that there was no obligation to defend and indemnify the insured. The application was dismissed.
SC Construction was a small family owned carpentry business. An employee named Jason asked to borrow a company vehicle one day because his car had broken down. He was permitted to take the vehicle home and to drive it back the next morning. Jason was not asked to show his driver’s licence to his boss before borrowing the vehicle. He was a 10 year employee and had been seen driving his own car to and from work almost every day. Jason did not have a valid Ontario driver’s licence. After borrowing the vehicle Jason was involved in an accident. He has since disappeared and did not defend a personal injury action that was commenced.
Wawanesa Mutual Insurance Company (“Wawanesa”) sought a declaration that their insured, SC Construction, had breached statutory conditions under the policy by letting an unlicensed employee drive their vehicle. They asserted that a condition was breached by letting Jason drive the vehicle when he was not authorized by law to do so and in failing to notify Wawanesa of a material change in risk. Wawanesa also asked for a declaration that it did not have a duty to defend or indemnify or to pay any costs or disbursements relating to the insured's defence of the personal injury action.
The test to be applied in determining whether Statutory Condition 4 had been breached was whether the insured had acted reasonably in all of the circumstances. It is a question of fact in each case. In this case, the Court found that the owner of SC Construction did not act unreasonably and therefore a breach of the statutory condition had not been established. There was no need to ask employees for licenses as they did not hire drivers. The owner of SC Construction had good reason to believe that Jason had a valid driver’s license.
Wawanesa also failed to establish that there was a material change in a risk which Wawanesa should have been notified of because Jason did not have regular or habitual use of the vehicle.
Wawanesa’s application was dismissed and cost were awarded to SC Construction. Wawanesa was obliged to defend and indemnify SC Construction.