Driving With An Expired Driver’s Licence: You May Still Be Covered
By Farid Mahdi
In Ontario, if a driver is involved in a car accident while driving without a valid driver’s licence, the driver may be denied insurance coverage making them personally responsible for any damages and injuries to others involved.
In Urban Lennox Gibbs v. Security National Insurance Company et al.,[1] the court was faced with the question of whether a driver involved in a car accident had made out the defence of due diligence to the offence of driving without a valid licence. In July 2021, the driver had suffered a sudden medical episode and lost consciousness while driving. He had rear-ended the vehicle in front of him leading to personal injuries to a third party. He was subsequently sued by the victim.
At the time of the accident, the at-fault driver had an insurance policy with Security National Insurance Company (“SNIC”). SNIC acknowledged liability under the automobile policy for the property damage claims. However, SNIC denied it had a duty to defend or indemnify the at-fault driver with respect to the personal injuries allegedly sustained by the plaintiff in the lawsuit against its insured/the at-fault driver on the basis that the driver was driving with an expired G2 driver’s licence at the time of the accident.
The “duty to defend” and “duty to indemnify” describe different obligations that an insurer may owe to its insured who has been alleged to have committed a wrongdoing – in this case, negligent operation of a motor vehicle causing personal injuries. An insurer’s duty to defend its insured in litigation arises where the underlying action raises a claim that could potentially fall within the scope of the coverage under the policy. The duty to defend is broader than the duty to indemnify (the duty to compensate the victim for their damages, losses, etc. under the policy). The time to determine the insurer’s duty to indemnify, if at all, is at the conclusion of the underlying lawsuit.[2]
As a result, the at-fault driver in Gibbs brought an application before the court for a declaration that he was entitled to coverage under his policy with SNIC because he had made out the defence of due diligence to the offence of driving without a valid licence. In the alternative, the driver sought relief from forfeiture under s. 98 of the Courts of Justice Act,[3] and s. 129 of the Insurance Act[4].
Defence of Due Diligence
Pursuant to statutory condition 4 (forming part of the standard automobile insurance policies in Ontario) and as prescribed under Ontario Regulation 777/93, enacted pursuant to section 234 of the Insurance Act, the insured person must not drive or operate or permit any other person to drive or operate the insured automobile unless the insured or other person is authorized by law to drive or operate it.
Driving without a valid driver’s licence is a strict liability offence[5] for which a due diligence defence is available.[6]
The Supreme Court of Canada discussed the circumstances in which a due diligence defence is available in the 2006 decision of Lévis (City) v. Tétreault.[7] The defence of due diligence is made out where the person accused of the offence either reasonably believed in a mistaken set of facts that, if true, would render the act or omission innocent; or took all reasonable steps to avoid the particular event. This involves consideration of what a reasonable person would have done in the circumstances.[8]
The person asserting the defence must show a reasonable misapprehension of facts or reasonable care with respect to the offence with which they are charged.[9] In this case, the driver had to demonstrate that he acted reasonably with respect to the expiry of his driver’s licence. He needed not to have acted perfectly: the standard is one of reasonableness.
The court in Gibbs was of the view that the driver was duly diligent in trying to maintain a valid licence immediately before his licence was set to expire in January 2020 and by having attended a road test in February 2020.
In late 2019, the at-fault driver, understanding that his licence was going to expire in January 2020, tried, albeit without success, to book a road test to obtain his full G class licence. He had booked a road on the first available date which was in February 2020. He provided evidence to the court that he attended the DriveTest Centre to take his test when he was instructed not to enter the building and to instead wait in his car in the parking lot. He waited for about an hour and when no one came to his vehicle to begin the road test, he returned home. He later learned that DriveTest had cancelled his road test appointment minutes before its scheduled start time. No reason was provided for the cancellation. He also provided the court with affidavit evidence, travel documents, the road test confirmation, and the road test cancellation email to substantiate the booked but later cancelled road test.
SNIC disputed that the driver had gone for the road test because when the driver gave a handwritten, unsworn statement to SNIC in September 2021 (after the accident), he had said that he was out of the country in February 2020, and he had not referred to his attempt to take a road test in February 2020. The court rejected SNIC’s argument. The court further did not admit an affidavit SNIC had secured from an agent of the Ministry of Transportation as the information was not based on the agent’s direct knowledge and considered hearsay. The court further found SNIC’s ask of its insured for passport pages and cell phone location data or communication records to show he was in the country in February 2020 as rather zealous.
The court in Gibbs found that the driver had mistakenly but reasonably believed that the licence expiration had been tolled due to the COVID pandemic.
The cancelled road test was scheduled in February 2020, shortly before the province-wide lockdowns. The driver gave evidence that he inferred that the road test was cancelled due to the pandemic. He also showed to the court that he was having difficulty rescheduling his road test, although he was able to renew his auto insurance and pay his insurance premiums. The driver had therefore mistakenly believed that expiration of his driver’s licence had been suspended because road tests were unavailable and that his licence was still valid at the time of the car accident in July 2021.
The court was further of the view that the driver’s alleged past licence lapses were not relevant to the question of whether the driver formed a reasonable belief, after his February 2020 road test cancellation, and the belief that he was covered by the COVID-related grace period that came into effect 11 days after the cancelled road test. The court also rejected SNIC’s assertion that the driver should have clarified with the Ministry that he was, in fact, covered by the grace period reiterating that the standard for due diligence is not one of perfection. The court in Gibbs held that the driver was not required to make every inquiry conceivable to satisfy himself that he was covered by the grace period. He was simply required to act reasonably.
Relief from Forfeiture
Relief from forfeiture refers to the power of a court to protect a person against the loss of an interest or a right because of a failure to perform a covenant or condition in an agreement or contract such as an insurance policy. The remedy is equitable in nature and purely discretionary.[10]
Section 98 of the Courts of Justice Act provides:
A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.
With respect to every contract of insurance made in Ontario, in particular, section 129 of the Insurance Act provides:
Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
In 2014, the Court of Appeal for Ontario in Kozel v. The Personal Insurance Company, held that relief from forfeiture provisions are to be construed broadly and given a fair, large, and liberal interpretation because they are remedial in nature.[11]
In the context of insurance disputes, relief from forfeiture is intended to prevent hardship to insurance beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer.[12]
In exercising its discretion to grant relief from forfeiture, a court must consider three factors: [13]
- the conduct of the applicant,
- the gravity of the breach; and,
- the disparity between the value of the property forfeited and the damage caused by the breach.
The court in Kozel, supra, observed that where an insured’s breach of a statutory condition amounts to non-compliance with a condition precedent, relief from forfeiture is not available, but where the breach amounts to imperfect compliance, such relief will be available. The court in Kozel held that an expired driver’s licence amounted to imperfect compliance and not non-compliance with a condition precedent (a fundamental term) for insurance coverage. Kozel further held that a court should find that an insured’s breach constitutes non-compliance with a condition precedent only in rare cases where the breach is substantial and prejudices the insurer.[14]
Based on the test articulated in Kozel, the court in Gibbs found that it was appropriate to grant the at-fault driver relief from forfeiture. With respect to the first factor of the test to grant relief from forfeiture (conduct of the driver), the court noted the following:
- The driver had paid his premiums on time.
- There was no evidence that the driver had deliberately avoided renewing his driver’s licence or that he knew that the COVID-related grace period did not apply to the expiration of his driver’s licence and acted intentionally, recklessly, or with willful blindness. His belief, albeit mistaken, was reasonable.
- The driver had given the information available to him at the time, he reasonably formed the (mistaken) view that his licence expiry was suspended due to the pandemic.
- The driver had not acted in bad faith vis-à-vis his insurance company. He had provided a statement to SNIC when asked to. He had also provided evidence in the application proceeding and attended a cross-examination.
- After the accident, he continued to act responsibly, retaining a lawyer at his own expense to defend the personal injury lawsuit against him, so that SNIC would not be prejudiced if it took over his defence in the lawsuit.
With respect to the second factor of the test to grant relief from forfeiture (gravity of the breach), the court in Gibbs noted:
- The driver had a valid licence from the Bahamas at the time, and he was an experienced driver. His breach thus did not affect his ability to drive safely.
- The driver’s breach in Gibbs was comparable to the one committed by the insured in Kozel, which the Court of Appeal characterized as minor in nature. The breach was not the result of deliberate disregard, willful blindness, or recklessness.
- The driver’s licence expired only 34 days before the province-wide grace period for licence expirations took effect.
With respect to the third factor of the test to grant relief from forfeiture (disparity between the value of the property forfeited and the damage caused by the breach), the court in Gibbs saw little to no damage or prejudice to SNIC by the breach and if SNIC were to assume the at-fault driver’s defence in the lawsuit. SNIC was already a party to the lawsuit and the lawsuit was in its early stages. Plus, the driver had hired a lawyer at his own expense to defend the lawsuit up to that juncture. In contrast, if the driver were denied relief from forfeiture, he would lose at least $800,000 in insurance coverage. He would have to fund his own defence costs and may ultimately be responsible to indemnify/compensate the car accident victim personally. He would also face subrogation claims from his insurance company (SNIC) and the plaintiff’s insurance company (Definity Insurance). His personal assets would therefore be exposed. The court found this disparity to be great.
Holding
The court in Gibbs granted the at-fault driver’s declaration that he was entitled to insurance coverage under his policy with SNIC on the basis that he made out the defence of due diligence to his offence of operating a motor vehicle with an expired driver’s licence and on the basis that he was entitled to the equitable remedy of relief from forfeiture.
The Takeaway
Having a valid driver’s licence is not necessarily a condition precedent to being insured under the Ontario automobile insurance policy. The offence is one of strict and not absolute liability with due diligence available as a defence. The analysis will be contextual and the standard will be one of reasonableness and not perfection. Driving with an expired licence is imperfect compliance, not non-compliance with a condition precedent in an insurance contract. A finding of non-compliance should be made only in rare cases. In all other circumstances, the breach will be deemed imperfect compliance, with relief against forfeiture available. When the court considers the insured’s breach of condition to have been “relatively minor,” the court is likely to grant relief to the insured.
[2] Monenco Ltd v Commonwealth Insurance Co, [2001] 2 SCR 699, 2001 SCC 49 (CanLII) at para 40; Halifax Insurance Co of Canada v Innopex Ltd, 2004 CanLII 33465 (ON CA) at para 38.
[5] A “strict liability” offence is one in which mens rea need not be established but where the defence of reasonable belief in a mistaken set of facts or the defence of reasonable care is available. In contrast, a “absolute liability” offence entails conviction on mere proof of the prohibited act without any relevant mental element. See R v Sault Ste Marie, [1978] 2 SCR 1299, 1978 CanLII 11 (SCC).
[6] Kozel v The Personal Insurance Company, 2014 ONCA 130 (CanLII) at para 15 [Kozel].
[7] [2006] 1 SCR 420, 2006 SCC 12 (CanLII).