Steering You Right: No driver’s license? No insurance.

By Jordan W. Charness

This week’s column deviates a little from my regular content because it actually looks at the details that I have to examine into before answering questions that I receive.

In this particular case, someone asked me to look into a serious problem they were having with their insurance company. For some unexplained reason, the owner of a car failed to renew his Ontario driver’s licence. He then had a major accident and his insurance company refused to pay out basing their decision on the Ontario law that requires motorists to have a valid driver’s licence for that type of vehicle for the insurance to remain in effect.

He wanted to know if, because of the fact that he had had his driver’s licence revoked for non-payment rather than because he had too many points, if that would be sufficient to require the insurance company to pay his claim.

Here is a part of the answer that I gave him when he posed this question on my web site.

“The first questions that you need to answer are: Did you know that you had to pay for your driver’s licence? Did you receive a notification or renewal?

If you did receive a renewal and simply forgot to pay for it, you will not have much of a leg to stand on.

About 10 years ago, there were several cases in Ontario where people sued their insurers who had refused to pay their claims based on the fact that they had not paid for their driver’s licences. Some judges at that time concluded that if you had an honest and mistaken belief that your licence was current, paid for and up-to-date, and had not received any type of notification or reminder telling you to pay, then you could rely on section 129 of the insurance act which provides as follows:

129. Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

While this paragraph is somewhat difficult to understand, one judge in particular, and several others who followed his ruling, ruled that if you did not know or suspect that your driver’s licence had been suspended due to failure to pay then you could rely on this section of the law to force your insurers to pay your claim.

Below are excerpts from judgments that would have ruled in your favour as long as you did not know or have any idea that your licence had expired.

In Quarrie v. State Farm Mutual Automobile Insurance Co. reflex, (1997), 32 O.R. (3d) 421, [1997] I.L.R. ¶1-3445 (Gen. Div), the plaintiff was involved in a motor vehicle accident four hours after his driver’s licence had expired. The insurer denied coverage. At the time of the accident, the plaintiff was unaware that his licence had expired. This was brought to his attention by the police officer investigating the accident. The plaintiff had received no notice from the Ministry of Transport of the need to renew his licence. Immediately after the accident, he applied for and received a renewal. The issue before the court was whether a driver, who had an honest belief that he was licenced to drive, was entitled to relief from forfeiture under s. 129.
[42] Justice Salhany reviewed the case law and concluded that the distinction between imperfect compliance and non-compliance in determining whether relief may be granted under s. 129 is the proper approach to apply. The plaintiff had a driver’s licence and had complied with both the statutory and contractual conditions of his policy. Subsequently, without his knowledge, his licence had expired. Justice Salhany noted that there was no suggestion that the plaintiff knew or had any idea that his licence had expired. He concluded that there was imperfect compliance in the circumstances of the case and granted relief from forfeiture.

[44] The insurer relied on the Prentice case, supra. Justice Leitch reviewed the jurisprudence and stated the following at pp. 4 and 5:
I am of the view that the deputy judge made no error in law in following Quarrie. In my view the interpretation of s. 129 of the Insurance Act applied by Salhany J. in Quarrie is a liberal interpretation of that provision as instructed by the Court of Appeal in Minto. I concur with the reasoning of Salhany J. in Quarrie and share his view that unknowingly driving with a licence which expired 14 days previously is imperfect compliance with a matter or thing to be done by the insured with respect to the loss within the meaning of s. 129 of the Insurance Act and the insured is therefore entitled to a consideration of whether there ought to be relief against forfeiture because of that imperfect compliance.

It is important to emphasize that every situation where there has been imperfect compliance does not lead to an order for relief against forfeiture. The court only has the power under s. 129 of the Insurance Act to provide such relief if the court considers it inequitable that the insurance should be forfeited or avoided because of the imperfect compliance. It is important therefore to consider whether there has been any bad faith, concealment or deliberate misrepresentation on the part of the insured and whether there is any prejudice to the insurer which were factors considered in Minto. In Quarrie it was important to the decision that Salhany J. found that there was no suggestion that the plaintiff in that case knew or had any idea that his licence had expired. Similar factors were also considered in Henckel where McWilliam J. found that the steps taken by the insured were reasonable in all the circumstances. It seems to me that it was relevant to the decision in Ram that the court found that there had been a deliberate failure to renew the driver’s licence with the result that it could not be considered imperfect compliance but rather non-compliance. In Chamberlin the insured was aware of the expiry date and the requirement for registration for the following year but put the registration off for various personal reasons. In Prentice the trial judge found that the plaintiff should have known that his licence had been suspended for non-payment of a fine and the Court of Appeal specifically referred to that finding in their brief endorsement.

All of these factors are relevant to the consideration of whether it is inequitable for insurance to be forfeited. In my view, considering the findings of fact made by the deputy judge in this case, I am of the view that it would be inequitable for the respondent to be denied insurance coverage given that she had taken all reasonable and prudent measures to have her licence renewed, as the deputy judge so found, and considering that the delay in renewal was only 14 days.

So, if you really did not know or suspect that your licence had expired, you might have had a case up until a recent Court of Appeal decision in 2007 which seems to have decided that the previous decisions were wrong and that the insurance company could refuse a payout if your licence was suspended for nonpayment.

The judge in the case of Guy Williams versus York Fire and Casualty Insurance Company (2007 ONCA 479) ruled as follows:

In my view, however, Quarrie was incorrectly decided. Section 129 does not give judges a broad discretion to “grant relief from forfeiture” generally where the conditions of an insurance policy are breached. To do so would grant the court power to alter the terms of a policy or conditions of coverage; this power was never envisioned by s. 129.

The Court of Appeal then went ahead and ruled that section 129 would not be sufficient to force the insurance companies to pay you just because you forgot to pay for your driver’s licence.