Court of Appeal Decision of the Week

MVA’s: Whether “Knew or Ought to Have Known” is an Objective or Subjective Test for Insurance Purposes?

Case: Schoenhalz v. Insurance Corporation of British Columbia, 2017 BCCA 289 (CanLII)

Keywords: MVA; Negligence; Owner’s Consent; Insurance (Vehicle) Act, RSBC 1996, c 231

Synopsis:

Five teenagers, including the Respondent Ms. Schoenhalz, take a 1986 Camaro to the campgrounds near Dry Lake. Once at the campsite, the Respondent and Ms. Reeves take the keys to the Camaro and set out to purchase hotdogs. The Respondent is 17 and has her driver’s licence. Ms. Reeves is 15, and does not.

Since Ms. Reeves has experience operating a standard transmission and the Respondent does not, Ms. Reeves takes the wheel. There is no discussion or concern on the part of either the Respondent or Ms. Reeves as to whether they have permission to drive the Camaro. A few miles down the road, Ms. Reeves loses control at a corner, her attention having been diverted by problems with the vehicle’s CD player. The car rolls over. The Respondent suffers serious injuries and third degree burns.

Since Ms. Reeves is uninsured at the time of the accident, the Respondent seeks a declaration she is entitled to recover damages against the Appellant Insurance Corporation of British Columbia (“ICBC”) pursuant to s. 20 of the Insurance (Vehicle) Act. In her pleadings, the Respondent alleges the accident is caused by negligence on the part of both Ms. Reeves and the owners of the vehicle in consenting to Ms. Reeves’ operation.

The Trial Judge determines the onus is on the Appellant ICBC to establish the defence under s. 91(1)(b) of the Insurance (Vehicle) Act in order to deny coverage under s. 20. Under s. 91, a person who suffers bodily injury caused by the use or operation of a vehicle the person “…knew or ought to have known was being operated without the consent of the owner…” is not entitled to recovery.

The Trial Judge determines the Appellant ICBC failed to show the Respondent “knew or ought to have known” Ms. Reeves lacked the permission of the Camaro’s owner to drive. For the Trial Judge, “knew or ought to have known” must be interpreted from the Respondent’s perspective – the perspective of an “incredibly young” 17-year-old girl, “both subjectively and objectively”. (See para. 18).

On Appeal, the Appellants submit the Trial Judge mischaracterized the legal standard for knowledge under s. 91 and “ignored binding and conclusive findings of fact which established the plaintiff knew Chelsea Reeves did not have the consent of the owner of the Camaro to operate the vehicle”. (See para. 20).

The Court of Appeal agrees; finding that, for the purpose of s. 91, the inquiry is objective and the Respondent knew or ought to have known the Camaro was being driven without its owner’s consent. The appeal is allowed and the order granted by the Trial Judge is set aside.

Importance:

The Court of Appeal identified the issue as follows:

…whether the Court erred in asking whether a “17-year-old girl” in the circumstances of Ms. Schoenhalz would have ‘turned her mind’ to the question of consent before getting into the driver’s seat of the Camaro – i.e., whether the phrase “knew or ought to have known” imports an element of subjectivity rather than constituting a purely objective standard which asks what a reasonable person would have known or thought. This may be contrasted with the finding that the plaintiff did not in fact know that Ms. Reeves did not have the owner’s consent – a finding of fact that must be shown to be clearly and palpably wrong if the appellant is to succeed on this basis. (See para. 23).

The decision distinguishes between “subjective” tests, which refer to what an individual actually knew, and “objective” tests, which deal with what a reasonably prudent person ought to have known. Citing Novak v. Bond, 1999 CanLII 685 (SCC), the Court of Appeal determined the phrase “ought to have known” typically invites an objective inquiry in the law of negligence. (See para. 39).

For the Court of Appeal, s. 91 of the Insurance (Vehicle) Act has a “long connoted” and “well-understood” standard. The standard is objective; concerned with whether a reasonable person in the Respondent’s position ought to have known Ms. Reeves was driving without the owner’s consent:

As I read s. 91, this case is concerned only with whether a reasonable person in the plaintiff’s place ought to have known Ms. Reeves was driving without the owner’s consent. In my opinion, a reasonable person would (as the trial judge here acknowledged) have known this; and even if one took into account the plaintiff’s age and experience, the test would also be met. As Mr. Brown submits, the plaintiff, age 17, had a driver’s license and was aware Ms. Reeves was too young to be licensed and that the owner’s permission was needed to drive the Camaro. (See para. 44).

The Court of Appeal found it was an error for the Trial Judge to apply a largely “subjective” standard to the Respondent and to take into account what was or was not reasonable for an “incredibly young” 17-year-old to have believed in the circumstances. As a matter of “public policy”, the Court of Appeal determined there was no rationale for holding the Respondent to a lower standard in relation to her decision to become Ms. Reeves’ passenger in the Camaro. (See para. 45).

Counsel for the Appellant: Guy Brown, Q.C. and Joel Morris (Harper Grey LLP, Vancouver)

Counsel for the Respondent: Janet Carter (Insurance Corporation of BC, North Vancouver) and Luke Bergerman (MJB Lawyers, Kamloops)

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Posted: Wednesday, August 16, 2017