Insurance Claim Form Involving Denial of Coverage Including Duty to DefendHelpful Guide to Understanding That Violations of Insurance Coverage May Be Subject to Some Latitude Rather Than an Absolute Denial

It is commonly understood, and perhaps mistakenly so, that exclusions and conditions within an automobile insurance policy that would trigger a 'denial of coverage' arising from a violation of licensing conditions and restrictions are subject to absolute liability; however such is often an inaccurate assessment as indeed 'some slack' may apply to certain circumstances similar to that which occurred within the case of Tut v. RBC General Insurance Company2011 ONCA 644.  The Tut case involved denial of coverage after Tut allowed a novice driver, being her son, to operate a vehicle with a G2 license and while, unknowingly, with a blood alcohol level above 0.0 percent.  Subsequently, the troublesome situation arose whereas, unfortunately, the son had attended a party the prior evening and consumed alcohol.  On the morning following the party, Tut allowed the son, who was without any visible signs of impairment and who was feeling as without any impairment by alcohol, to drive a vehicle owned by Tut.  Subsequently the son was involved in an accident.

Upon investigation into the accident, the son was found to have a blood alcohol content of .01 percent which, from an absolute technical perspective was a violation of the law applicable at that time, and therefore a violation of the insurance policy.  Due to the violation, RBC denied coverage including the 'duty to defend' against litigation brought against Tut and the son by victims of the accident.  Tut brought suit against RBC for wrongful denial of coverage and was successful in the lower courts; however, RBC appealed to the Court of Appeal for a determination that the violation was an absolute offence under the Highway Traffic ActR.S.O.  1990, c.  H.8 and therefore the insurance coverage exclusion for 'driving while disqualified' was properly trigged.

From this unfortunate situation, the legal question arose as to whether such a driving offence under the Highway Traffic Act was an absolutely liability offence, meaning without the availability of any rebuttal explanation, or whether the relevant driving offence was a strict liability offence with the availability of a reasonable 'due diligence' rebuttal where evidence that a person acted reasonably to avoid violating the law; but despite so, still violated the law unknowingly.  Whereas the right to claim coverage from RBC turned on the answer to this question, the answer was of significant importance and would produce a signficant result in establishing an understanding of the law in such a situation as well as signficant result, either good or bad, for Tut.

In reviewing whether the Highway Traffic Act violation was absolute, and thus completely inexcusable without availability of a 'without knowledge rebuttal', the Court of Appeal in Tut stated:

[21]  RBC relies on two recent cases which held that s.  6(1) is an absolute liability offence.  Neither case assists RBC.

[22]  The first case, Maharaj, refers to this court's decision in Kanda, but does not correctly apply it.  The court in Maharaj takes into consideration the public safety goal of the legislation without engaging in any real weighing of society's revulsion against punishing the morally innocent.  The latter is why the law recognizes a presumption against absolute liability.  Instead, Maharaj places emphasis on the fact that driving is a privilege, [page487] and on ease and efficiency of enforcement.  In my opinion, it is wrongly decided.

[23]  The second case RBC relies on, R.  v. Nyaata, [2005] O.J.  No.  4754, 2005 ONCJ 454 (CanLII), states that the offence of having a blood alcohol content greater than zero is an absolute liability offence.  However, the court also held that the evidence of a strong odour of alcohol on the accused's breath and the fact he held a G2 licence constituted a prima facie case that was rebuttable but, as the defence had called no evidence, a conviction would be registered.  Holding that the violation of s.  6(1) can be rebutted is inconsistent with the offence being one of absolute liability.  This case, too, is of no assistance to RBC.

[24]  Applying the factors in Kanda to this case, I make the following observations:

(1) In Kanda, this court was concerned with the same overall legislative scheme as here, namely, the HTA, and it held that the overall regulatory pattern of the HTA is neutral.  (2) The penalty for a violation of s.  6(1) is a suspension of the offending driver's licence.  This penalty is more severe than the penalty of a modest fine for the seat belt infraction in Kanda.  This factor tilts more in favour of the offence in this case being one of strict liability as compared to Kanda.  (3) Some of the sections in the HTA create an absolute liability offence by specifically excluding a due diligence defence.  The language of s.  6(1) does not specifically preclude a due diligence defence.  Section 6(1) also uses the mandatory word "must" but, as noted at para.  38 of Kanda, the case law does not support the conclusion that mandatory language necessarily results in absolute liability.  (4) The important public purpose in Kanda was, as here, road safety and protection of users of the road.  The court in Kanda held that classification of the offence as one of strict liability was an appropriate balance between encouraging drivers to be vigilant about safety and not punishing those who exercise due diligence.  I would reach the same conclusion in this case.

[25]  Thus, the application of the four Kanda factors leads me to conclude that the presumption against the offence being one of absolute liability has not been rebutted.  The offence is one of strict liability.

It is notable that the Tut case relates to an accident occurring in June 2007 and that the Highway Traffic Act, including the regulation thereto and the 0.0 percent blood alcohol condition, changed since such time and that the precise facts and issue at question within the Tut case may be without current application; however, the Tut case still shows that where an offence is subject to strict liability, rather than absolutely liability, what appears at first glance as an insurance violation that would result in a denial of coverage may still involve some latitude for leniency.

Summary Comment

The denial of coverage by an insurer may be financial disastrous to those left without insurance protection; and accordingly, whether the conditions that support the reason to deny coverage should be absolutely applied without availability of any possible excuse or strictly applied with availability of a reasonable 'due diligence' excuse, is of utmost importance.  While the Highway Traffic Act conditions that applied when the Tut case occurred may now be changed, the principle that a strict liability offence under the Highway Traffic Act does afford possibility of a defence does provide for leniency in what would otherwise be a situation of absolute liability with serious insurance coverage consequences.

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