Insurance law – Automobile insurance – Coverage – Policies and insurance contracts – Duties and liabilities of insurer – Right of insurer to subrogation

2237466 Ontario Inc. (c.o.b. 409 Collision Centre (2011)) v. Intact Insurance

An automobile insurer that provides coverage for vehicle storage fees is a “person lawfully entitled” to apply for relief under section 24 of the Ontario Repair and Storage Liens Act, R.S.O. 1990, c. R.25.

[2016] O.J. No. 6336

2016 ONSC 7711

Ontario Superior Court of Justice

December 8, 2016

I.S. Bloom J.

This action arose out of the storage of a damaged vehicle (the “Vehicle”). The Vehicle was owned by the respondent Brennan and insured through the respondent insurer, Intact. Following an accident on December 20, 2015, the Vehicle was deemed a total loss. It was towed to a storage facility operated by the applicant, 2237446 Ontario Inc. (c.o.b. 409 Collision Centre 2011)) (“409 Collision”). The insured signed a Vehicle Repair and Storage Agreement with 409 Collision, in which she agreed to pay them $85 daily for storage. The insured’s automobile policy provided coverage for storage fees, as well as for the loss of her vehicle.

Although not explicitly stated in the decision, it seems that 409 Collision was not paid for the Vehicle’s storage (at least not to its satisfaction). It thus claimed a lien against the Vehicle pursuant to section 4 of the Repair and Storage Liens Act, R.S.O. 1990, c. R.25 (“RSLA”).

The insurer applied for an initial certificate under section 24 of the RSLA. That provision states:

Return of article when dispute

24. (1) Where a claimant claims a lien against an article under Part I (Possessory Liens) and refuses to surrender possession of the article to its owner or any other person entitled to it and where one of the circumstances described in subsection (1.2) exists, the owner or other person lawfully entitled to the article may apply to the court in accordance with the procedure set out in this section to have the dispute resolved and the article returned.

The initial certificate was issued to the insurer on February 9, 2016. At that time, the insurer had not indemnified the insured for the loss of her vehicle.

409 Collision applied for a declaration that the initial certificate was null and void. It took the position that the insurer was not a “person lawfully entitled to the article” under section 24 of the RSLA. It argued that the insurer had no right of subrogation at the time it applied for the initial certificate because it had not yet paid the insured for the loss of her vehicle. It particularly relied on section 278(1) of the Insurance Act, R.S.O. 1990, c. I.8:

278. (1) An insurer who makes any payment or assumes liability therefor under a contract is subrogated to all rights of recovery of the insured against any person and may bring action in the name of the insured to enforce those rights

The Judge did not accept the applicant’s reasoning. In doing so, he relied heavily on the case of 121897 Ontario Limited o/a Castle Auto Collision & Mechanical Service v. Certas Insurance, 2016 ONSC 357 (“Castle Auto”). In that case, the insurer applied for relief under section 24 of the RSLA, prior to making a decision with respect to its insured’s coverage. It used its own funds to pursue the application. The Judge in Castle Auto found that the insurer was protecting its insured’s interests as well as its own, and that there were subrogation rights in respect of any payment made.

In the instant case, the Judge found that the insurer’s section 24 application served to protect the same interests as those protected in Castle Auto. He further reasoned:

[10] … I find that an insurer in the position of Intact, within s. 278 (1) of the Insurance Act has “assumed liability” under the contract of insurance for the storage fees, and is subrogated to the rights of its insured pursuant to s. 278 (1). I further find that this right of subrogation allows the insurer to bring an application under s. 24 (1) of the RSLA as a “person lawfully entitled to” the automobile.

[11] I am strengthened in that conclusion because it protects the insured’s rights to have the storage fees paid by the insurer pursuant to the insurance contract, the rights of the insurer to contest the quantum of those fees, and the rights of the storage company to have security for those fees.

The Judge dismissed the application, with leave to make submissions on costs.

This case was digested by Raylene M. Smith and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at rsmith@harpergrey.com or dpilley@harpergrey.com or review their biographies at http://www.harpergrey.com.