The Court of Appeal for Ontario has released a decision interpreting the meaning of the phrase “authorized by law” in s. 4(1) of O. Reg. 777/93 (Statutory Condition 4 in the OAP).
In Kereluik v. Jevco, the insured Kereluik was arrested for impaired driving causing bodily harm following a motor vehicle accident. He was released from custody subject to his undertaking, given to a peace officer, “to abstain from the possession and consumption of any alcoholic beverages”. A breach of the undertaking constituted a criminal offence.
Kereluik was then involved in a second motor vehicle accident, in which he injured a third party. At the time of the second accident, Kereluik was impaired. He was charged with impaired driving and breach of his previous undertaking. He was subsequently convicted of both charges, as well as the impaired driving charge from the earlier accident.
The injured third party brought a tort claim against Kereluik. On the date of the second accident, Kereluik was insured under a valid, standard motor vehicle insurance policy issued by Jevco. He also held a valid Ontario driver’s licence, issued by the Ministry of Transportation of Ontario. No express conditions attached to his licence.
Jevco initially offered Kereluik a defence, but later took a policy-breach position. It claimed that at the time of the accident, Kereluik was not “authorized by law” to drive because he had breached his earlier undertaking (to the peace officer) after the first accident. Accordingly, Jevco decided that Kereluik was in breach of Statutory Condition 4 and refused to defend or indemnify him as a result of the second accident.
The plaintiff’s underinsured carrier brought an application, seeking a declaration that Kereluik was fully insured. The Applications judge held that on the date of the second accident, Kereluik was “authorized by law” to drive within the meaning of Condition Four since: (1) he held a valid Ontario driver’s licence; (2) he was in compliance with the terms of that licence; (3) the licence contained no alcohol-related condition or prohibition; and (4) his licence was in good standing.
The Court of Appeal dismissed Jevco’s appeal. The Court held that Statutory Condition 4 and the phrase “authorized by law” in the condition is concerned with the validity and terms of an insured’s licence to drive at the time of the relevant motor vehicle accident. This entitlement depends on the insured’s possession of a valid driver’s licence and his or her compliance with the terms of the licence at the time of the incident giving rise to the challenge to the insured’s lawful authority to drive or operate the vehicle. Nothing in the language or legislative history of Statutory Condition 4 suggests that the phrase “authorized by law”, as used in the condition, is intended to apply to breaches of the law not directly connected with violations of driving licence conditions.
See Kereluik v. Jevco, 2012 ONCA 338
