In its recently released decision in Brown et al. v Paudash et al., the Superior Court confirmed that an excluded driver endorsement is in effect even if the excluded driver never received notice of the exclusion.
Key Facts:
This case arose from a motor vehicle accident on September 1, 2015, in which Linda Brown was injured while driving her motorcycle. She commenced an action against Vanessa Paudash, who allegedly struck her with an SUV owned by her father and insured by Intact under her parents’ policy.
Due to her driving history, Vanessa was unable to be added as a driver under the Intact policy. To maintain coverage after she moved back into her parents’ house, Vanessa and her parents were required to execute an OPCF 28A Excluded Driver Endorsement, which designated her as an excluded driver.
When her father requested to add his SUV to the policy, his insurance broker sent another OPCF 28A form to be signed by Vanessa and her parents. In the cover letter, the broker reiterated the reason for the exclusion and specifically stated, “[t]here will be no coverage should [Vanessa] drive.” Both OPCF 28A forms contained the same terms and stated that they applied to “All listed vehicles.”
Intact denied coverage based on the Excluded Driver Endorsements. Linda Brown’s own insurer, the Commonwell Mutual Insurance Group, challenged the validity of the denial by way of application, arguing in part that the Endorsements were void because Intact failed to prove Vanessa had knowledge that she was an excluded driver. This issue was complicated by Vanessa and her parents’ lack of participation in the proceedings.
The Decision
Summary judgment was granted in favour of Intact. The Court found that the statutory scheme did not require notice to an excluded driver to establish the validity of an excluded driver endorsement.
In its analysis, the Court referred to the Court of Appeal’s decision in Gore Mutual Insurance Co. v 1443249 Ontario Ltd., which concluded that the Insurance Act did not require a properly executed OPCF 28A form for an excluded driver endorsement to be valid. While the standard OPCF 28A form is pre-approved by the Superintendent of Financial Services and requires both the signature of the insured and excluded driver, the form itself does not create a legal requirement that it be signed for it to be valid. Rather, the evidence must demonstrate that there was an agreement between the insurer and the insured to amend the contract of insurance to exclude coverage for a driver.
The Court also referred to the comments of the application judge in Gore at para. 24, which specifically noted that notice to the excluded driver is not required at all:
[24] There is no provision in the Insurance Act that requires notice or the agreement of the excluded driver. Given my finding that the form approved by the Superintendent does not create the legal requirement for a signature, it cannot create the requirement that the excluded driver be given notice. While it is good policy that an excluded driver understands that there is no insurance coverage, the excluded driver is not a party to the insurance contract. There is therefore no requirement that the excluded driver agree to amend the terms of the contract, in writing or otherwise. Failure to provide notice to the excluded driver does not itself invalidate the Excluded Driver Endorsement.
The Court then considered the more recent decision in Royal & Sun Alliance Insurance Co. of Canada v Intact Insurance Co., where the Court of Appeal rejected the notion that an excluded driver endorsement was necessarily void because it did not follow the exact pre-approved form, as required by section 227(1) of the Insurance Act. In Royal, the focus was, again, on what the insured knew. Having found that the insured was fully aware of the exclusion at the time of the accident, it was determined that the endorsement remained binding and in effect despite any alleged deviation from the pre-approved form.
Consistent with the prevailing case law, the Court held that it was not a requirement for an excluded driver to have notice in order for the exclusion to be valid. Instead, a decision of whether an excluded driver endorsement remained binding and in effect is determined based on the knowledge of the insured. The Court further stated, “[i]f notice were a requirement for validity, it should be clearly stipulated in the Insurance Act so as to make the obligations of insurers clear.”
After considering the entirety of the circumstances, it was the Court’s view that Intact’s Excluded Driver Endorsement was “clearly valid” at the time of the accident. As such, Intact had no duty to defend or indemnify Vanessa, with respect to the accident. The Court found that there was uncontroverted evidence that Vanessa and her parents (Intact’s insureds) signed the Endorsement, that the insureds agreed to the exclusion, and that the insureds understood, at the time, that Vanessa was excluded from driving the vehicle.
Key Takeaways
This decision seems to be in keeping with the prevailing case law, which has found that the absence of a properly executed OPCF 28A does not, in itself, render an excluded driver endorsement void. Here, the Court made it clear that insurers are not obligated to notify or obtain the consent of an excluded driver to establish the validity of an excluded driver endorsement.
While the courts have applied some flexibility with respect to the manner in which an excluded driver endorsement may be issued, it should be noted that this decision does not impact an insurer’s obligation to ensure that the insured is fully aware of the limitations of their policy, including the purpose and implications of the exclusion.
It is also important to note that the onus of establishing the enforceability of an exclusion falls on the insurer seeking to rely on it. In this regard, a properly executed OPCF 28A form, while not legally required, holds evidentiary value, as it provides clear evidence of an agreement to amend the policy and may assist in preventing costly legal disputes.
See Brown et al v. Paudash et al, 2024 ONSC 2960 (CanLII), https://canlii.ca/t/k513x
1Gore Mutual Insurance Co. v. 1443249 Ontario Ltd., 2004 CanLII 43772 (ON CA), https://canlii.ca/t/1jb3x
2Royal & Sun Alliance Insurance Company of Canada v. Intact Insurance Company, 2017 ONCA 381 (CanLII), https://canlii.ca/t/h3p45
