Economical Mutual v Caughy: The Meaning of “Accident” in the Insurance Context

Economical Mutual Insurance Company v Caughy, 2016 ONCA 226 [Caughy] is the latest decision in the ongoing conflict between the prerogative of automobile accident insurers to deny coverage when faced with ambiguity over statutory definitions, on the one hand, and the need to uphold coverage where ambiguous cases are coupled with serious debilitating injuries. In Caughy, the Ontario Court of Appeal (“ONCA”) was tasked with reviewing the application judge’s decision to uphold coverage for a claimant with serious spinal cord injuries. The insurer in this case, Economical Mutual Insurance Company (“Economical”) challenged this on the grounds that the vehicle in question was not being used as an ordinary vehicle and argued that coverage should therefore be denied. In attempting to clarify the law in this area, the ONCA ultimately found in favour of the injured party. However, the law in this area remains unclear. While this decision tips the balance in favour of injured parties seeking compensation in cases where coverage for the activity causing the accident is uncertain, how to apply the test for determining such coverage in difficult cases remains unclear at best.

Issues and Reasoning

Patrick Caughy (“Patrick”) was camping with his family at a trailer park. On the evening in question, two patrons staying at the campground parked their motorcycles near Patrick’s trailer. Later that evening, after it was dark, the patrons moved the motorcycles to a different location beside Patrick’s trailer. Shortly after, Patrick was playing tag with his children when he tripped and fell on one of the motorcycles and fell head first into a trailer, sustaining serious spinal cord injuries.

Patrick sought accident benefits from his automobile insurer. In Ontario, an injured party, whether at-fault or not, must claim accident benefits from their own insurer and not from the other party. Accident benefits include the cost of medical treatment and loss of income resulting from an injury sustained involving a motor vehicle. According to statute , the injured party can later sue an at-fault party in tort for personal injuries, provided that certain conditions are met.

Economical denied Patrick’s claim for accident benefits on the basis that the incident in question failed to meet the definition of “accident” found in the Statutory Accident Benefits Scheme (“SABS”). On an application brought to the Superior Court of Justice, the application judge disagreed, holding that temporarily parking the motorcycle where Patrick tripped “constituted an ordinary or well-known use of the vehicle” and therefore constituted an accident under SABS.

The two-part test for the definition of an accident derives from Amos v Insurance Corp of British Columbia, [1995] 3 SCR 405 [Amos]. The test consists of a purpose element and a causation element. The application judge found that both the purpose and causation tests were satisfied. Economical appealed the court’s finding on the purpose test only.

The test laid out in Amos, on which the court relied, is as follows:

1. Did the accident result from the ordinary and well-known activities to which automobiles are put?
2. Is there some nexus or causal relationship (but not necessarily a direct or proximate causal relationship) between the appellant’s injuries and the ownership, use or operation of his vehicle? Or is the connection between the injuries and the ownership, use or operation of the vehicle merely incidental or fortuitous?

On appeal, Economical raised several persuasive arguments: 1) that the application judge erred in failing to find there must be an active use of the vehicle to meet the purpose test, and 2) that the application judge erred in finding that the motorcycle was temporarily parked, as opposed to being out of use and therefore inoperable.

With respect to the first issue, the ONCA found the argument to be misconceived. It held the proper analysis to be whether “the incident in issue resulted from the ordinary and well known activities to which automobiles are put” and that active use was not necessarily required to meet this test. Consequently, it attempted to clarify that the use to which an automobile is put should be considered as part of the causation stage of the analysis.

Purpose vs. Causation: An Unclear Distinction

Given the importance of what is at stake for injured parties in such cases, there should be clarity in the law regarding when a victim of someone else’s negligence involving an automobile will be denied coverage. By considering the use or purpose of a vehicle in its causation analysis, the ONCA further blurred the distinction between purpose and causation—thereby failing to provide such clarity in Caughy.

At first glance, the ONCA’s application of the purpose test seems to suggest that it is merely a threshold test to determine whether the vehicle is not being used as a diving platform, as Justice Binnie suggested in Citadel General Assurance Co v Vytlingam, 2007 SCC 46 [Citadel]. However, as the ONCA proceeds through its reasoning, it begins to undo the clear distinction it originally rested its reasoning upon.  Referring to Justice Binnie’s “clear” examples of the scope of the purpose test—such as using a vehicle as a diving board, a storage locker for dynamite, or as a prop for a drive shed—the ONCA determined that the correct question was whether parking a vehicle constitutes such an aberrant use. They answered in the negative. Fine so far.

However, the lack of clarity in this question became exacerbated when the ONCA referred to Dominion of Canada General Insurance Company v Prest, 2013 ONSC 92 [Prest]. In Prest, the insured parked his car in a car wash and then tripped and fell on a concrete curb inside. He was touching the car when he fell. While the ONCA found the appellant’s use of Prest to be misplaced, it commented on how the trial judge in that case applied the purpose test. The trial judge in Prest reasoned that the vehicle in the car wash was neither being used nor operated because it was parked in a garage and therefore did not satisfy the purpose test. The ONCA stated that the trial judge in Prest failed to consider whether the purpose could be satisfied when a vehicle is parked and not in active use. It did not comment on what the outcome of Prest should have been.

But by referring to Prest, the ONCA in Caughy arguably opened a can of worms. Indeed, the court in Prest did apply the correct test: It considered whether the incident arose from the ordinary and well-known activities to which automobiles are put. Assessing the use and operation of the vehicle in the circumstances is what helped to answer that question. Thus surely the element of use or operation—what the insured was doing with the vehicle at the time of the incident—is inextricably bound up with the question of whether the activities giving rise to the incident constituted an ordinary and well-known use of the vehicle. In Prest, it clearly did not: The insured could have tripped on the curb regardless of his car being there, notwithstanding his plans to wash it.

In Caughy, the motorcycle happened to be in the wrong place at the wrong time; however, it is important to consider the circumstances occurring around the use of the motorcycle that led to Patrick’s injury. The ONCA suggested that these considerations are more appropriately dealt with at the causation stage. But this is unworkable in a number of possible situations where the use of the vehicle and the activities engaged in by the insured are inseparable from the purpose test.

Conclusion

In attempting to clarify the law in this area, the ONCA ultimately found in favour of the injured party. However, the law in this area remains unclear. If the proper application of the purpose test is merely a threshold, it has very little utility in the analysis, because virtually all situations will pass the test, except those aberrant uses cited by Justice Binnie in Amos. While this decision tips the balance in favour of injured parties seeking compensation, it fails to address a range of situations where the circumstances surrounding the accident are related to the purpose test. The implications of this remain to be seen.