Madill v. Chu, [1977] 2 SCR 400

Supreme Court of Canada

Madill v. Chu, [1977] 2 S.C.R. 400

Date: 1976-11-16

J.A. Madill, in his Quality as Attorney in Canada for the Non-Marine Underwriters, Members of Lioyd’s England (Plaintiff) Appellant;

and

Kuo Chu (Defendant) Respondent.

1976: March 25; 1976: November 16.

Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Insurance—Motor vehicle insurance—Accident—Disability benefit—Exclusionary clause—Construction—Inapplicability of contra proferentem rule—Exclusion of a person “entitled to receive benefits under workmen’s compensation rule”—Whether applicable to plan insured who has not claimed workmen’s compensation.

Respondent was insured under a motor vehicle policy whereby the insurer agreed to pay a weekly disability benefit to any occupant of the insured vehicle who as a result of an accident was disabled and prevented from performing his normal occupation or employment. The policy however contained an exclusion in respect of a person “who is entitled to receive the benefits of any workmen’s compensation law or plan”.

Respondent was injured while driving the vehicle in the course of his employment as a taxi driver but made no claim under The Workmen’s Compensation Act, R.S.O. 1970, c. 505. The trial judge was of opinion that the exclusionary clause did not bar recovery by the plaintiff and this view was accepted by the Court of Appeal.

Held (Laskin C.J. and Spence and Dickson JJ. dissenting): The appeal should be allowed.

Per curiam: As the words in the insurance policy are the exact words which appear in The Insurance Act, R.S.O. 1970, c. 224, and the Act directs their inclusion in the standard automobile policy the principle of contra proferentem does not apply to their interpretation.

Linsley v. Co-operators Insurance Association of Guelph, [1975] I.L.R. 1206 referred to.

[Page 401]

Per Martland, Judson, Ritchie, Pigeon, Beetz and de Grandpré JJ.: To construe the exclusionary clause as being ineffective because an award has not been claimed and allowed against the Board would involve an assumption that notwithstanding express agreement as to the existence of all the facts requisite to entitlement, the Board might refuse to make an award. In the absence of any evidence, such an assumption cannot be entertained as a factor in determining the language of the policy and of The Insurance Act.

A workman’s entitlement to receive payments is not dependent upon a formal application having been made and approved. To construe otherwise would mean that the insurer’s liability could be varied adversely by the independent act of the insured, i.e. whether or not the insured neglected to make a claim against the Board. Such a situation would run contrary to the law normally applicable in interpreting such an agreement.

Per Laskin C.J. and Spence and Dickson JJ. dissenting: Notwithstanding that the contra proferentem principle does not apply it is sound construction to construe the provisions of a contract broadly and the exclusions narrowly. “Benefits” is a broad term and embraces more than the word “compensation”. A person should not be regarded as entitled to receive the benefits of workmen’s compensation unless he has applied for compensation and obtained an award.

APPEAL from a judgment of the Court of Appeal for Ontario[1] dismissing an appeal from a judgment of Cavers Co. Ct. J. at trial. Appeal allowed, Laskin C.J. and Spence and Dickson JJ. dissenting.

R.F. Wilson, Q.C., and A.M. Rock, for the appellant.

Harvey Spiegel, for the respondent.

The judgment of Laskin C.J. and Spence and Dickson JJ. was delivered by

SPENCE J. (dissenting)—This is an appeal from the judgment of the Court of Appeal for Ontario pronounced on October 28, 1974, granted by leave of this Court pronounced on January 29, 1975. By its judgment, the Court of Appeal for Ontario had dismissed an appeal from the judgment at trial

[Page 402]

pronounced on January 28, 1974, by His Honour Judge Cavers. By that judgment, His Honour Judge Cavers had awarded the plaintiff the sum of $1,960.

The trial came before His Honour Judge Cavers upon an agreed statement of facts. That statement sets out the whole of the facts which are relevant here and that statement reads as follows:

The stated case is as follows:—

1. The Plaintiff is a taxi driver and resides in the City of Toronto, in the Municipality of Metropolitan Toronto.

2. On or about the 1st day of February, 1973, the Plaintiff while in the course of his employment as a taxi driver was operating an automobile owned by one, Murray Goodman when he sustained bodily injuries as a result of a collision with another motor vehicle owned and operated by David J. Dadd.

3. At the time of the said collision, the motor vehicle which was being driven by the Plaintiff was insured by a standard automobile policy issued by the Defendant insurer as number 173497TD.

4. By the terms of the said policy, the Defendant agreed to pay to any person while an occupant of the insured motor vehicle who sustained bodily injury by an accident arising out of the use or operation of the said automobile, a weekly benefit for the period during which the injury shall wholly or continuously disable such person and prevent him from performing in [sic] any or every duty pertaining to his occupation or employment, said weekly benefit to be at the rate of 80% of the gross weekly earnings of the person injured subject to a maximum of $70.00 per week.

5. As a result of the injuries sustained by him in the accident aforesaid, the Plaintiff was wholly and continuously disabled and prevented from performing any or every duty pertaining to his occupation for [sic—“or”] employment for a period of 28 weeks.

6. At the date of the accident aforesaid, the Plaintiff was gainfully employed as a taxi driver and had gross weekly earnings in excess of $100.00 per week.

7. The Plaintiff has caused Notice of the Claim to be given to the Defendant and has furnished the Defendant with a Proof of Claim as provided by the said Policy. The Defendant has refused to pay the benefit provided for in the said Policy upon the grounds that the Policy contains an exclusionary clause which clause reads as follows:

[Page 403]

(2) EXCLUSIONS

a) The insurer shall not be liable under this section for bodily injury to or death of any person,…

ii) who is entitled to receive the benefits of any workmen’s compensation law or plan;…

8. The Plaintiff has made no claim under The Workmen’s Compensation Act, R.S.O. 1970 Chapter 505.

9. The Plaintiff has commenced an action against the owner and operator of the other motor vehicle involved in the collision but such action has not yet come to trial.

10. In the event that this Court determines that the Plaintiff is entitled to the benefits provided for in the said Policy, the Plaintiff is entitled to recover from the Defendant the sum of $1,960.00.

As Arnup J.A., in giving reasons for the Court of Appeal for Ontario, pointed out, the whole issue in the appeal is the applicability of the exclusion clause in the standard automobile policy issued by Lloyd’s of London. That exclusion clause appears in para. 7 of the agreed statement of facts above.

Cavers, Co. Ct. J., was of the opinion that the said exclusionary clause, under the circumstances outlined in the statement of facts, did not bar the recovery by the plaintiff. Arnup J.A., in the Court of Appeal, accepted this view and, with respect, I am of the opinion that the courts below have come to the proper conclusion.

As will be seen, the problem is whether the words in Exclusion (2)(a)(ii) apply to bar the claim. In that exclusion, the all-important words are “entitled to receive the benefits of any workmen’s compensation law or plan”. It is true that those words appear in the standard automobile policy but they do so because s. 232 of The Insurance Act in subs. (1) provides:

232. (1) Every contract evidenced by a motor vehicle liability policy shall provide the death and total disability benefits set forth in subsection 2 of Schedule E in the terms, conditions, provisions and exclusions and subject to the limits as set forth in Schedule E.

[Page 404]

The exclusion in Sch. E appears in the exact words which also appear in the standard automobile policy. No enlightenment of the meaning of the words “entitled to receive the benefits” appears in The Insurance Act and Arnup J.A. turned to the provisions of The Workmen’s Compensation Act to determine the meaning of the words as they appear in the latter statute. Arnup J.A. made a careful review of the use of the words “benefits”, “entitled to receive” and “entitled to payment” as they appeared in the various sections of The Workmen’s Compensation Act. He expressed the view with which, with respect, I agree, that “benefits” is the broader term and embraces more than is embraced by the word “compensation”. A workman may be entitled to benefits which do not result in any monetary compensation; for instance, he may be entitled to the very extensive rehabilitation provided for under the statute.

There is no need to repeat Arnup J.A.’s review but he expressed his conclusion in the words:

In my view, the words “entitled to receive” [benefits or compensation] when used in the Act refer to cases where a workman has elected to claim compensation, the Board has found the claim well founded, and has made an award of compensation.

There would seem to be no sound reason why the words should not have the same meaning in the insurance policy. This would seem particularly true in view of s. 8 of The Workmen’s Compensation Act which provides:

8. (1) Where an accident arising out of and in the course of his employment happens to a workman under such circumstances as entitle him or his dependants to an action against some person other than his employer, the workman or his dependants, if entitled to benefits under this Part, may claim such benefits or may bring such action.

(2) If less is recovered and collected by a judgment in the action or by settlement than the amount of benefits to which the workman or his dependants are entitled under this Part, the difference between the amount recovered and collected and the amount of such benefits is payable to the workman or his dependants.

. . .

[Page 405]

Under subs. (1) of that section, the workman could elect whether to claim benefits under the Act or take an action “against some person other than his employer”. The latter words would, of course, include an action against an insurance company. Section 72 of The Workmen’s Compensation Act which gives to the Board exclusive jurisdiction to determine all matters and questions arising under this Part, and s. 8 is in that Part, and s. 3(b) which indicates that a workman may not succeed in a claim if the accident is attributable to the serious and wilful misconduct of the workman both support my interpretation of the meaning of the section.

It is true that s. 8 subs. (2) makes provision that if the amount collected by the workman who has elected to sue rather than claim compensation is less “than the amount of benefits to which the workman or his dependants are entitled under this Part” and perhaps might indicate that entitlement was not a matter of having made a claim under the Act and having that claim allowed but, in my view, this is not sufficient to alter my conclusion and I prefer to take the view that the words are simply loosely used and should have read “to which the workman or his dependants would have been entitled under this Part”.

Arnup J.A. accepted as an alternative argument in favour of the contention of the plaintiff, the respondent in the Court of Appeal and in this Court, the application of the well known contra proferentem rule. However, as I have pointed out, the words in the insurance policy are the exact words which appear in The Insurance Act and their inclusion in the standard automobile policy is directed by the provision of the statute I have quoted. Under those circumstances, I agree with the view expressed by Henry J. in Linsley v. Co-operators Insurance Association of Guelph[2], at p. 1210. But, apart altogether from the contra proferentem rule, it is sound construction of a contract to construe the provision thereof broadly and the exclusions thereof narrowly.

[Page 406]

I would, therefore, dismiss the appeal and in accordance with the order granting leave to appeal direct that the costs of the application for leave and the costs of the appeal be paid to the respondent on a solicitor and client basis.

The judgment of Martland, Judson, Ritchie, Pigeon, Beetz and de Grandpré JJ. was delivered by

RITCHIE J.—I have had the advantage of reading the reasons for judgment of my brother Spence in which he has accurately described the circumstances giving rise to this appeal and has reproduced the statement of facts agreed to by the parties at the trial of this action before His Honour Judge Cavers.

The questions of law upon which leave to appeal to this Court was granted are described in para. 3 of the application for leave to appeal as follows:

(a) That the Court of Appeal for Ontario erred in construing the exclusionary clause in the policy of insurance under consideration in this case so as to conclude that it did not apply unless a formal application for workmen’s compensation benefits was made by the Respondent, and such application was approved;

(b) That the Court of Appeal for Ontario erred in applying the principle contra proferentem in construing the exclusionary clause contained in the policy of insurance under consideration in this case, since the clause itself was included in the policy by virtue of a statutory enactment, and not at the instance of the Applicant.

These questions arise by reason of the refusal of the appellant insurer to pay the respondent’s claim for damage sustained by him by reason of personal injuries and for which indemnity is alleged to be provided in the standard automobile insurance policy issued by the appellant covering the automobile owned by Murray Goodman and operated by the respondent in his capacity as a taxi driver, when the insured vehicle collided with another automobile.

The appellant’s refusal to pay the claim which had been duly asserted by the respondent in accordance with the terms of the policy was based upon the ground that the respondent “was entitled

[Page 407]

to receive the benefits” of The Workmen’s Compensation Act of Ontario (R.S.O. 1970, c. 505) and that his claim was therefore within the exclusion contained in the policy for which provision is made in ss. (3)(ii) of Sch. E to The Insurance Act, R.S.O. 1970, c. 224 and which provides as follows:

2. EXCLUSIONS

(a) the Insurer shall not be liable under this section for bodily injury to or death of any person…

(ii) who is entitled to receive the benefits of any workmen’s compensation law or plan;…

“Compensation” is provided for in s. 3 of The Workmen’s Compensation Act, supra, in the following circumstances:

3. (1) Where in any employment, to which this Part applies personal injury by accident arising out of and in the course of employment is caused to a workman, his employer is liable to provide or pay compensation in the manner and to the extent hereinafter mentioned except where the injury

(a) does not disable the workman beyond the day of accident from earning full wages at the work at which he was employed, or

(b) is attributable solely to the wilful misconduct of the workman unless the injury results in death or serious disablement.

Section 4 of the same statute provides:

Employers in the industries for the time being included in Schedule 1 are liable to contribute to the accident fund as hereinafter provided but are not liable individually to pay compensation.

“Accident Fund” as used in the statute means the fund provided for the payment of compensation in respect of employment in an industry included in Sch. 1 of the Act and it is the fund administered by the Workmen’s Compensation Board. I agree with my brother Spence and with the Court of Appeal that the word “benefits” as employed in the Exclusion is to be read as including “compensation”.

The singular feature of the present case is that no evidence was adduced by either party at the

[Page 408]

trial and the record is therefore confined to an agreement as to the existence of facts which disclose that the respondent’s injuries were caused while he was in the course of his employment in an industry included in Sch. 1 of the statute, namely, the taxicab business, and that he was disabled beyond the day of the accident from earning “full wages at the work at which he was employed”. There is no suggestion that his injuries were attributable to any misconduct on his part. These facts, to which the respondent agreed, in my opinion constitute prima facie evidence that the respondent’s injury was one for which the accident fund was “liable to pay compensation” and was therefore an injury in respect of which the respondent was entitled to the benefits of The Workmen’s Compensation Act.

The reasoning upon which the respondent relies is epitomized in the following passage in the reasons for judgment of Mr. Justice Arnup in the Court of Appeal:

In my view, the words ‘entitled to receive’ (benefits or compensation) when used in the Act refer to cases where a workman has elected to claim compensation, the Board has found the claim well founded, and has made an award of compensation. This is not conclusive as to the meaning of the words in the exclusionary clause of the insurance policy, but it puts an added onus on the insurer to show that the words mean something different.

Accordingly, the case for the respondent rests upon the submission that the words “entitled to receive benefits” as used in the exclusionary clause carry a different meaning from the phrase “entitled to benefits” and that they can only apply to an insured who has elected to make a claim and to whom an award has been made by the Workmen’s Compensation Board.

Section 8 of The Workmen’s Compensation Act was cited on behalf of the respondent in support of the conclusion that the exclusionary clause “did not apply unless a formal application for workmen’s compensation benefits was made by the respondent, and such application was approved.” The relevant portions of the section in question read as follows:

[Page 409]

8. (1) Where an accident arising out of and in the course of his employment happens to a workman under such circumstances as entitle him or his dependants to an action against some person other than his employer, the workman or his dependants, if entitled to benefits under this Part, may claim such benefits or may bring such action.

(2) If less is recovered and collected by a judgment in the action or by settlement than the amount of benefits to which the workman or his dependants are entitled under this Part, the difference between the amount recovered and collected and the amount of such benefits is payable to the workman or his dependants.

It appears to me, however, with the greatest respect for those who may hold a different view, that the effect of these provisions is that, notwithstanding the workman’s election not to make a claim for the benefits to which he is entitled under The Workmen’s Compensation Act, whenever the amount of such benefits exceeds the amount recovered in an action brought by him against a person other than his employer, the excess is payable to the workman or his dependants. In my view this must mean that the workman’s entitlement “to receive” payments is not dependent upon a formal application for workmen’s compensation having been made and approved.

If entitlement of itself carries with it the right to be paid, it follows, in my opinion, that a workman who is “entitled to benefits” under Part 1 of the Act is to be taken as being “entitled to receive benefits” within the meaning of Exclusion 2(a)(ii) of the policy. To construe the words “entitled to receive the benefits” as they are used in Sch. E of The Insurance Act and in the policy as being ineffective unless the workman has elected to make a claim for compensation which the Board has found to be well founded, in my opinion must mean that in a case such as the present one where the facts are admitted which entitle an insured workman to benefits, he can nevertheless elect to recover against the insurer rather than the Board by the simple process of neglecting to make a claim against the Board. I think it must follow that such a workman can by his own act successfully deprive the insurer of an advantage which it otherwise would have enjoyed under The Insurance Act

[Page 410]

and the insuring agreement. It seems to me that this would mean that the insurer’s undertaking as contained in the insuring agreement could be varied adversely to its interest after the happening of the event insured against by the independent act of the insured and such a situation in my view runs contrary to the law normally applicable in interpreting such an agreement.

It follows, in my view, that to construe the exclusionary clause as being ineffective because an award has not been claimed and allowed against the Board would involve the assumption that notwithstanding express agreement as to the existence of all the facts requisite to entitlement, the Board might refuse to make an award. In the absence of any evidence to support such an assumption, I do not think it can be entertained as a factor in determining the meaning to be assigned to the language employed in The Insurance Act and the policy here in question.

It was contended on behalf of the respondent that the reference in s. 8(1) to the entitlement of a workman “to an action against some person other than his employer” is to be construed as including the insurer. This contention, however, fails to take into account the fact that the type of action contemplated by the section against any “person other than the employer” must be founded in tort rather than contract, and that an action against the insurer must of necessity be based on the terms of the contract of insurance.

As to the second question upon which leave to appeal was granted, I am in agreement with my brother Spence that the principle of contra proferentem does not apply to the interpretation of the exclusion here in question as it is one which is required to be included in such a policy by virtue of the provisions of Sch. E of The Insurance Act hereinbefore referred to, and the insurer is not to be held responsible for the manner in which it is expressed.

For all these reasons I would allow this appeal and set aside the judgment of His Honour Judge Cavers and of the Court of Appeal for Ontario. In conformity with the order made in this Court on the application for leave to appeal, the amount of

[Page 411]

this judgment will be paid by the appellant to the respondent together with the costs of the said application and of this appeal on a solicitor and client basis.

Appeal allowed, judgments below set aside, LASKIN C.J. and SPENCE and DICKSON JJ. dissenting.

Solicitors for the appellant: Fasken & Calvin, Toronto.

Solicitors for the respondent: Green & Spiegel, Toronto.