Supreme Court of Canada
Canadian General Insurance Co. v. MacKinnon, [1976] 2 S.C.R. 606
Date: 1975-11-27
Canadian General Insurance Company, a body corporate Appellant;
and
Ellen MacKinnon and Donald MacKinnon, on behalf of themselves and all persons having judgments or claims against Clifford Roy Smith and David Murray Coldwell for which indemnity is provided by certain motor vehicle liability policies issued in the respective names by the Defendants, Respondents.
1975: February 6, 7; 1975: November 27.
Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.
ON APPEAL FROM THE SUPREME COURT OF NOVA SCOTIA, APPEAL DIVISION
Insurance—Motor vehicle insurance—Statutory action against insurers—Statutory coverage—Defences in respect of coverage in excess of the statutory minimum—Two insurance policies each for minimum—Insurance Act, 1962 (N.S.), c. 9, ss. 92, 98, 100L, as amended by 1966 (N.S.), c. 79.
The respondents suffered damages in a collision between their motor vehicle and one owned by David Murray Coldwell and driven by Clifford Roy Smith. They sued and obtained judgment against both Coldwell and Smith in the sum of $67,287.53 and invoked s. 98(1) of the Insurance Act, 1962 (N.S.), c. 9 as amended by 1966 (N.S.), c. 79, to have insurance money, payable under separate policies issued to Coldwell and Smith by different insurers, applied to satisfy that judgment. Each policy provided for indemnification to the minimum limit of $35,000 prescribed by s. 92(1) of the Act. The appellant insurance company urged, unsuccessfully in the Supreme Court of Nova Scotia, both at trial and on appeal, that there was only one fund available to the extent of $35,000 in respect of which an insurer was precluded by reason of s. 98(4) from raising a defence against a judgment creditor suing under s. 98(1) and that the appellant could raise against the judgment creditors any defence open to it against its insured in respect of any indemnity in excess of that $35,000, even
[Page 607]
when a different insurer had provided that minimum sum.
Held (Ritchie, Pigeon, Beetz and de Grandpré JJ. dissenting): The appeal should be dismissed.
Per Laskin C.J. and Judson, Spence and Dickson JJ.: The appellant’s contention that so far as the judgment creditor was concerned the minimum sum of $35,000 was the maximum that could be claimed unembarrassed by defences open to an insurer against its insured was properly disposed of by Cooper J.A. in the Appeal Division.
Per Martland J: Section 98(11) does not place a $35,000 ceiling on the rights of a claimant under s. 98(1) and (4). The words “provide for coverage in excess of the limits mentioned in s. 92” refer to any policy which provide for the benefit of the insured a coverage in excess of the $35,000 minimum and it is to the insurer that certain rights of defence with respect to coverage in excess of these limits are given.
Per Ritchie, Beetz and de Grandpré JJ., dissenting: Section 98(11) expresses the intention to confine the s. 98(4) rights of a judgment-holding claimant to the minimum limits whether the coverage is provided by one contract or more than one contract. Where these minimum limits have been recovered from the first loss insurer any insurer whose contract provides additional or other insurance has available to it any defence that it is entitled to set up against the insured named in its policy.
Per Pigeon, Beetz and de Grandpré JJ., dissenting: There is no reason for construing s. 98(11) as referring to the coverage under each contract rather than to the total coverage provided where there is more than one contract. By virtue of s. 100L(1) a second insurer is required to cover the loss only as an insurer of the excess and should not be placed in the position of a first loss insurer.
APPEAL from a judgment of the Supreme Court of Nova Scotia, Appeal Division, dismissing an appeal from a judgment of Dubinsky J. in favour of judgment creditors. Appeal dismissed,
[Page 608]
Ritchie, Pigeon, Beetz and de Grandpré JJ. dissenting.
J.T. MacQuarrie, and J.D. Murphy, for the appellant.
L.A. Bell, QC, and H.E. Wrathall, Q.C., for the respondents.
The judgment of Laskin C.J. and Judson, Spence and Dickson JJ. was delivered by
THE CHIEF JUSTICE—This appeal arises out of a statutory action by judgment creditors brought by them pursuant to s. 98(1) of the Insurance Act, 1962 (N.S.), c. 9 as amended by 1966 (N.S.), c. 79. They had suffered personal injury and property damage in a collision of their motor vehicle with one owned by David Murray Coldwell and driven at the time by Clifford Roy Smith. They sued and obtained judgment against both Coldwell and Smith in the sum of $67,287.53 and, this judgment remaining unsatisfied, they invoked s. 98(1) to have insurance money, payable under separate indemnification policies issued to Coldwell and Smith by two different insurers, applied to satisfy the judgment.
Each of the policies provided for indemnification to the minimum limit of $35,000 prescribed by s. 92(1) of the Insurance Act. Coldwell’s policy represented “first loss” insurance under s. 100L of the Insurance Act, and his insurer paid over to the judgment creditors the entire sum of $35,000 plus costs, leaving an unsatisfied balance of $28,047.55. The issue in this appeal is whether Smith’s insurer is obliged to pay this sum (being a sum under $35,000) without being entitled to raise defences that would have been open to it as against its insured Smith. It is common ground that this question turns on the meaning and application of s. 98(11) of the Insurance Act, considered in the context of other relevant provisions of the Act, such as s. 92 and s. 100L among others.
Section 98(11) reads as follows:
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98. (11) Where one or more contracts provide for coverage in excess of the limits mentioned in Section 92, then, except as provided in subsection (12), the insurer may,
(a) with respect to the coverage in excess of those limits; and
(b) as against a claimant,
avail itself of any defence that it is entitled to set up against the insured, notwithstanding subsection (4).
What is urged by the appellant here, being what it urged unsuccessfully before Dubinsky J. in the Nova Scotia Supreme Court, Trial Division, and before the Appeal Division, is that, at least in respect of a claim arising out of motor vehicle liability policies referable to one motor vehicle, there is only one fund available to the extent of $35,000 in respect of which an insurer is precluded, by reason of s. 98(4), from raising a defence against a judgment creditor suing under s. 98(1). When that minimum sum is provided, an insurer (so the argument ran), be it the same insurer or, as here, a different insurer which has issued a separate policy to a second insured, may raise against the judgment creditor any defences open to it against its insured in respect of any indemnity sum in excess of the first $35,000. In short, it is contended that, in so far as the judgment creditor is concerned, the minimum sum of $35,000 is the maximum that he can claim unembarrassed by defences open to any insurer against its insured.
In my opinion, Cooper J.A., speaking for the Nova Scotia Appeal Division, has properly disposed of this contention. I agree with his disposition and, accordingly, would dismiss this appeal with costs.
MARTLAND J.—I agree with the reasons of the Chief Justice and wish only to add the following comments. I do not regard s. 98(11) of the Insurance Act, Statutes of Nova Scotia 1962, c. 9, as amended by 1966, c. 79, as being enacted to place a $35,000 ceiling on the rights of a claimant provided under s. 98(1) and (4) of that Act. In my opinion it is intended to enable an insurer who has issued a policy providing coverage in excess of the
[Page 610]
$35,000 minimum established by s. 92(1), in respect of such excess, to rely, as against a claimant, upon any defence to which he is entitled as against the insured.
When s. 98(11) uses the words “provide for coverage in excess of the limits mentioned in Section 92” it is referring to any policy which provides for the benefit of the insured a coverage in excess of the $35,000 minimum. It is the insurer in such a policy to whom is given the rights of defence given by the subsection “with respect to the coverage in excess of those limits”.
I would dispose of the appeal in the manner proposed by the Chief Justice.
The judgment of Ritchie, Beetz and de Grandpré JJ. was delivered by
RITCHIE J. (dissenting)—I have had the advantage of reading the reasons for judgment of the Chief Justice and of Mr. Justice Pigeon and I would dispose of the matter as suggested by my brother Pigeon; but as I adopt a somewhat different approach in reaching the same conclusion, I think that I should express myself separately.
This appeal is concerned exclusively with the true meaning to be attached to the wording used in s. 98(11) of the Insurance Act, Statutes of Nova Scotia 1962, c. 9, as amended by 1966, c. 79, and I find it necessary for the purpose of these reasons to reproduce that section which reads:
(11) Where one or more contracts provide for coverage in excess of the limits mentioned in Section 92, then, except as provided in subsection (12), the insurer may,
(a) with respect to the coverage in excess of those limits; and
(b) as against a claimant,
avail itself of any defence that it is entitled to set up against the insured, notwithstanding subsection (4).
This subsection must be read in conjunction with sections 92(1), 98(1), 98(4) and 100L quoted in
[Page 611]
the passage from the judgment of Cooper J.A. in the Appellate Division which is reproduced in the reasons for judgment of my brother Pigeon, and when it is so read, it will be seen that it is designed to limit the area of absolute responsibility to which insurers could have been exposed at the suit of a s. 98(1) claimant if s. 98(1) and (4) stood alone.
The claimant referred to in subs. (11) is thus a person who has recovered judgment against an insured for a claim against which a contract of insurance provides indemnity. Armed with such a judgment and “notwithstanding that that person is not a party to the contract”, he is accorded the statutory right to “have the insurance money payable under the contract applied in or towards the satisfaction of his judgment …”. It will be noted that the rights of such a claimant arise altogether apart from the contract of insurance, and this is made plain in the reasons for judgment of Chief Justice Kerwin in Northern Assurance Co. Ltd. v. Brown[1], where he speaks of the claimant’s right under s. 214 of The Insurance Act, R.S.O. 1950 c. 183, which is couched in virtually the same terms as s. 98(1) in the following language:
That claim is a substantive right given by statute and does not arise under the contract.
This statutory right is further materially extended by the provisions of s. 98(4) which entitle the claimant to have the insurance money applied on his judgment even if the insured himself is in default under the terms of his contract and would have no right of recovery whatever thereunder. If s. 98(1) and (4) stood alone, the judgment-holding claimant could have access to the full amount of the coverage provided by the contract or contracts of insurance, even if the insured was in breach of the contract and could recover nothing himself.
[Page 612]
In my opinion, s. 98(11) and the similar sections which preceded it from 1932 (N.S. Laws 1932 c. 5, sections 24 (5) and (6)) onwards, were enacted by the Legislature in order to place a limitation on the far-reaching and irrebuttable statutory right accorded to a judgment-holding claimant by s. 98(4) so that the special rights conferred by that section would only extend to the minimum limits mentioned in s. 92, i.e. $35,000, no matter what the amount of the coverage might be.
With the greatest respect for those who may hold a different view, I am unable to escape the conclusion that, notwithstanding the somewhat convoluted language in which it is framed, subs. (11) nonetheless expresses the intention of the Legislature to confine the s. 98(4) rights of a judgment-holding claimant to the minimum limits whether the coverage is provided by one contract or more than one contract. It follows, in my view, that where, as here, the minimum limits have been recovered from the first loss insurer, any “insurer” whose contract provides additional or “other” insurance has available to it any defences that it is entitled to set up against the insured named in its policy.
It will be seen that I agree with my brother Pigeon that the words “where one or more contracts” as they occur in subs. (11) are to be construed as meaning “where one or more contracts, taken together, provide”, and I am further in agreement with him in his conclusion that by reason of s. 100L the only policy to which such a claimant has access is the owner’s policy, any other coverage being “excess insurance”.
It is for these reasons that I would dispose of this appeal as proposed by my brother Pigeon.
Beetz and de Grandpré JJ. also concurred in the judgment of
PIGEON J. (dissenting)—The facts of this case are stated as follows by Cooper J.A. speaking for the Court of Appeal of Nova Scotia:
[Page 613]
An accident occurred on November 27, 1971, when a motor vehicle owned by David Murray Coldwell and operated by Clifford Roy Smith ran into the motor vehicle of Donald MacKinnon causing personal injuries to him and to the other respondent, Ellen MacKinnon, in addition to property damage.
The respondents brought action against both Mr. Coldwell and Mr. Smith. Liability was admitted and the damages were assessed at $63,047.55. Costs were awarded in the amount of $4,239.98 and judgment entered for $67,287.53. It remained unsatisfied.
The respondents then brought action against Canadian General Insurance Company and Co-operative Fire and Casualty Company. At the time of the accident the vehicle owned by Coldwell and operated by Smith was insured in Coldwell’s name as owner with the Co-operative company, and Smith was insured with respect to the operation of the vehicle under a policy issued by Canadian General Insurance Company. The action of the respondents was brought pursuant to the provisions of s. 98 of the Insurance Act, N.S. Stats., 1966, c. 79, proclaimed in force January 1, 1969. I quote s. 98(1) and other relevant subsections of s. 98:
(1) Any person who has a claim against an insured, for which indemnity is provided by a contract evidenced by a motor vehicle liability policy, notwithstanding that that person is not a party to the contract, may, upon recovering a judgment therefor in any province or territory of Canada against the insured, have the insurance money payable under the contract applied in or towards satisfaction of his judgment and of any other judgments or claims against the insured covered by the contract and may, on behalf of himself and all persons having such judgments or claims, maintain an action against the insurer to have the insurance money so applied.
…
(4) The right of a person who is entitled under subsection (1) to have insurance money applied upon his judgment or claim is not prejudiced by …
(b) any act or default of the insured before or after that event in contravention of this Part or of the terms of the contract;
…
and nothing mentioned in clauses (a), (b) and (c) is available to the insurer as a defence in an action brought under subsection (1).
[Page 614]
…
(11) Where one or more contracts provide for coverage in excess of the limits mentioned in Section 92, then, except as provided in subsection (12), the insurer may,
(a) with respect to the coverage in excess of those limits; and
(b) as against a claimant,
avail itself of any defence that it is entitled to set up against the insured, notwithstanding subsection (4).
Section 92(1) of the Insurance Act reads as follows:
Every contract evidenced by a motor vehicle liability policy insures, in respect of any one accident, to the limit of at least $35,000, exclusive of interest and costs, against liability resulting from bodily injury to, or the death of, one or more persons and loss of, or damage to, property.
The policies issued by Canadian General Insurance Company and Co-operative Fire and Casualty Company insured Coldwell and Smith respectively to the limit of $35,000.00 each. It is common ground that the Co-operative policy was first loss insurance under s. 100L(1), which reads:
Subject to Section 96, insurance under a contract evidenced by a valid owner’s policy of the kind mentioned in clause (j) [k] of Section 74 is, as respects liability arising from or occurring in connection with, the ownership, use or operation of an automobile owned by the insured named in the contract and within the description or definition thereof in the policy, a first loss insurance and insurance attaching under any other valid motor vehicle liability policy is excess insurance only.
Co-operative Fire and Casualty Company paid to the respondents the amount of the coverage under that policy, namely, $35,000.00 and costs of $4,239.98. This left the sum of $28,047.55 unsatisfied. Canadian General Insurance Company denied liability to Smith and to all claimants against Smith by reason of violation on the part of Smith of statutory conditions forming part of its standard automobile policy issued to Smith and, in particular, statutory condition 3.
[Page 615]
This issue was referred by application to the Chambers’ Judge for decision as preliminary to the main action of Ellen MacKinnon and Donald MacKinnon against Canadian General Insurance Company and Cooperative Fire and Casualty Company. The hearing took place before Mr. Justice Dubinsky. He decided that the Canadian General Insurance Company coverage was not in excess of the limits under s. 92 and accordingly, held that Canadian General Insurance could not avail itself of those defences which it might otherwise have raised against Smith.
In coming to the conclusion that the appeal should be dismissed, Cooper J.A. said:
After as careful consideration as I can give to the language of s. 98(11) I have concluded that its meaning is that if there is more than one contract each must be treated equally so that defences which might be set up against each insured are available only with respect to the coverage provided the insured under his policy in excess of the limits under s. 92. The result follows that there is not here one fund of $35,000.00 exhausted by the coverage under the Co-operative Company policy but separate funds each of that amount under each policy, that of the Co-operative Company and that of the Canadian General.
It was contended by counsel for the appellant that so to construe s. 98(11) would require a change in the opening words to “Where a policy provides for coverage in excess of the limits …” or, alternatively, “Each policy that provides for coverage in excess of the limits …” It may well be that the wording of s. 98(11) could be clearer, but in my opinion “coverage” is referable to what is provided under an insurance policy. In the event of there being more than one policy in force with respect to liability for a motor vehicle accident, as is the situation here, each nevertheless provides its own coverage and I think it would be doing violence to the purpose and intent of s. 98(11) if the coverage of each policy were lumped together to arrive at a total amount of insurance provided by insurers and term that the “coverage” intended by s. 98(11) with respect to injured persons having claims under s. 98(11). The wording nowhere refers to coverage in total nor is there in my view any language used to indicate that “coverage” is the sum of that provided under two or more policies. The use of the word “insurer” in the singular I regard as supporting the view which I have expressed….
[Page 616]
It was submitted, as I understand it, that if s. 98(11) was intended to enable a claimant to recover from the first loss insurer up to $35,000.00, the minimum limits, without the insurer being able to avail itself of any defence it might have against the insured and to entitle the claimant to like recovery under the second or subsequent policies it would not have been necessary to amend the forerunner of s. 98(11) as was done in 1951. That forerunner was s. 24(5) of c. 5 of the Statutes of 1932. The opening words were, “Where a policy provides for coverage in excess of the limits …” They became by s. 12 of c. 40 of the Statutes of 1951” … where a policy provides, or, if more than one policy, the policies provide …”
It is my opinion that the amendment in 1951 is to be construed as merely providing specifically for the situation where there is more than one policy in force as is the case here. I find no intent in the language of the amendment that there be but one minimum limits fund despite the number of policies in force. The amendment of 1951, considered as legislative history of s. 98(11), does not therefore impel me to construe s. 98(11) as the appellant would have us construe it.
With respect, I have to disagree with the conclusion reached in the Courts below. I agree that “coverage” usually refers to what is provided under an insurace policy. However, in s. 98(11), it refers to what is provided by “one or more contracts”. I can see no reason for construing this provision as referring to the coverage under each contract rather than to the total coverage provided when there is more than one. On the contrary, it appears to me that such construction is opposed to the literal meaning of the words: “Where one or more contracts provide”. The verb in the plural shows, I think, that the contracts are to be taken together, not separately. Also, such construction fails to give effect to the use of the expression “one or more contracts” which, in the present enactment, stands where formerly the expression used was “a policy”.
By virtue of para. (i) of s. 18 of the Interpretation Act (R.S.N.S. 1967, c. 151), words in the singular include the plural. Therefore, s. 98(11) as
[Page 617]
construed by the Courts below is given exactly the same meaning as when the text was “Where a policy provides for coverage in excess …”.The legislative change substituting the expression “Where one or more contracts provide for coverage” should not be deemed to have been made without purpose. The use of the words “one or more contracts” can have no other object than to make the enactment referable to the coverage provided by all the contracts taken together instead of to each one taken separately. If the coverage provided by each policy is looked upon separately, then the amendment was an exercise in futility, it meant the addition of needless words making no difference in the result, something which should not be presumed. As Laskin J. (as he then was) put it in Bathurst Paper Limited v. Minister of Municipal Affairs of the Province of New Brunswick[2], at pp. 477-8:
Legislative changes may reasonably be viewed as purposive, unless there is internal or admissible external evidence to show that only language polishing was intended. The submission of the appellant would have it that the amendment in 1968 accomplished nothing of substance, but merely improved the drafting. This is, in my opinion, an untenable position.
With respect, it appears to me that Cooper J.A. made a basic error when saying of s. 98(11): “its meaning is that if there is more than one contract, each must be treated equally”. This may well have been true when the opening words of the former provision were: “Where a policy provides …” However, at the same time as s. 98(11) was enacted in its present form: “Where one or more contracts provide …”, s. 100L (1) was added providing that “insurance under a contract evidenced by a valid owner’s policy … is … a first loss insurance and insurance attaching under any other valid motor vehicle liability policy is excess insurance only.” As a result of this provision, the coverage provided when an accident occurs involving a driver insured under both an owner’s policy issued to the owner of the automobile and under another motor vehicle liability policy, is not on an equal footing towards the two insurers. The coverage provided under the owner’s policy is first loss insurance and the coverage provided under the
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other policy is excess insurance only even if the two policies are identical. Because no policy may be issued covering less than the limits stated in s. 92(1), the coverage provided under the other policy is necessarily in excess of those limits.
In this connection, I would stress that the wording of s. 98(11) is “Where one or more contracts provide” not “Where one or more policies”. In my view, this distinction is important. What is contemplated by this enactment is what the contract provides, not what the policy stipulates. In the situation existing here what the appellant’s contract provides for is, by virtue of s. 100L (1), coverage in excess of $35,000 because there is another first loss insurance covering that limit. Thus, by virtue of an express statutory enactment, appellant’s contract provides for coverage only in excess of the statutory minimum limits. Therefore, entirely apart from the question whether the two contracts are to be considered together for the purpose of s. 98(11), it appears to me that, even if appellant’s contract only is looked at, it must be said to “provide for coverage in excess” of $35,000 because such is its effect by virtue of s. 100L (1). The distinction between “contract” and “policy” is clearly made in s. 98 and it should not be ignored.
In s. 98(11), the “coverage” provided for by the contracts cannot mean anything else than the coverage which the contracts actually provide for in the circumstances. The whole of s. 98 is concerned with the indemnity actually provided by contracts evidenced by motor liability policies. The opening words refer to the situation that obtains when a claimant has recovered judgment against the insured. Therefore, the question for the Court when there is more than one insurer is not: “How does each policy read?” but: “What is the coverage provided?” I can see no reason for not answering this question by looking not only at the policies, but also at the effect of s. 100L (1). By virtue
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of that section, the contracts between the two insurers and the insured are not here on a footing of equality. The contract evidenced by the owner’s policy is first loss insurance and, therefore, covers at least to the limits specified in s. 92(1). The other contract, on the contrary, covers only in excess of those limits or of the higher limit that may have been specified in the owner’s policy.
One has to bear in mind that we are dealing here, not with the contractual obligations of an insurer as stipulated in a policy, but with a statutory liability that is fastened absolutely in disregard of defences that may be contractually available. This absolute liability has been established, not for the full coverage, but only to the extent of the minimum limits required. In my view, it is an integral part of the legislative scheme disclosed by the 1966 statute that, in situations such as in the present case, the coverage provided by any insurer other than the issuer of the owner’s policy is excess insurance only. The judgment at trial accepts that situation to a degree. The two insurers have not been put on an equal footing. The appellant has been held liable only for the excess over the amount covered by the owner’s policy. However, for the purposes of s. 98(11), that is with respect to the question whether contractual defences are available, it was, as Cooper J.A. says, treated equally. This is, in my view, illogical, it results in putting the second insurer towards the claimants in the same situation as if it was a first loss insurer while, by virtue of s. 100L (1), it is required to cover the loss only as an insurer of the excess.
For those reasons, I would allow the appeal with costs throughout and set aside the judgment of the Appeal Division of the Supreme Court of Nova Scotia and the order of the Trial Division dated January 4, 1974.
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Appeal dismissed with costs, RITCHIE, PIGEON, BEETZ and DE GRANDPRE JJ. dissenting.
Solicitor for the appellant: J.T. MacQuarrie, Halifax.
Solicitor for the respondents: H.E. Wrathall, Halifax.