Funk v Wawanesa Mutual Insurance Company, 2017 ABQB 308

Court of Queen’s Bench of Alberta Citation: Funk v Wawanesa Mutual Insurance Company, 2017 ABQB 308 Date: 20170508 Docket: 0903 19437 Registry: Edmonton Between: Andrew Funk Plaintiff / Respondent / Cross-Applicant - and - Wawanesa Mutual Insurance Company Defendant / Applicant / Cross-Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice E.J. Simpson _______________________________________________________ Introduction [ 1 ] The Defendant/Applicant, Wawanesa Mutual Insurance Company (Wawanesa), brings an application for

summary dismissal of the Plaintiff/Respondent’s Statement of Claim. Wawanesa alleges the SEF No. 44 Family Protection Endorsement (Endorsement or SEF 44) – attached to the Alberta Standard Automobile Policy SPF No. 1 – provides no coverage to the insured, the Plaintiff/Respondent, Andrew Funk (Mr. Funk). [ 2 ] Mr. Funk disputes the denial of coverage, and brings a cross-application for

summary judgment and an order setting the matter down for an assessment of the damages he has claimed. Issue [ 3 ] The overarching issue of importance to Mr. Funk is whether the Endorsement provides him coverage in the circumstances in which he finds himself. [ 4 ] The answer to that question turns on the

interpretation of the term “unidentified automobile” in the Alberta Standard Automobile Policy SPF No. 1 (Standard Policy or SPF #1) and the Endorsement attached to it. Decision [ 5 ] The

summary dismissal application brought by Wawanesa is denied. [ 6 ] A declaratory order is granted in favour of Mr. Funk to the effect that he has coverage under the Endorsement.

[ 7 ] Given the nature and scope of the present corroborating evidence adduced by Mr. Funk, I am not satisfied that a disposition that is fair and just to both parties can be made on the existing record, regarding the issue of liability. His application for

summary judgment, with respect to liability, is denied. Facts [ 8 ] Mr. Funk, on May 20, 2008, owned a 1999 Jeep TJ. He carried insurance for it with Wawanesa. His insurance included the Standard Policy and the attached Endorsement. [ 9 ] The parties agree to the following facts: (

a) the Plaintiff, Andrew Funk (date of birth – December 12, 1985), was involved in a single vehicle rollover accident on May 20, 2008, on 101 Street, approximately 450 metres south of 30 Avenue, Edmonton, Alberta; (

b) the Plaintiff was operating a 1999 Jeep TJ and was travelling southbound on 101 Street when the vehicle entered the right ditch and struck a field approach; (

c) as a result of the accident, the Plaintiff sustained numerous injuries including a spinal cord injury; and (

d) the Plaintiff’s injuries have affected him in all aspects of his life. [ 10 ] Mr. Funk deposes that while operating his vehicle on May 20, 2008 at approximately 10:00 p.m., it was dark and the area where the rollover occurred had no street lights. He states that while travelling south, he travelled in his own lane on the two-lane partially paved roadway, straight and flat, at the location of the rollover. He was familiar with the road having driven it many times. [ 11 ] He deposes that he noticed the headlights of an oncoming vehicle and he remained in his lane, southbound.

The road was sufficiently wide enough for two vehicles to pass one another. However, as the other vehicle approached, it came towards him. [ 12 ] Mr. Funk swerved to the right to avoid an impact with the oncoming vehicle. When he swerved, his vehicle entered the ditch on his right, struck an approach and rolled over in an adjacent field. [ 13 ] He deposes that no other objects were on the road that may have caused him to swerve, including specifically a deer. [ 14 ] Mr.

Funk believes that without swerving, his vehicle and the other would have collided. [ 15 ] He acknowledges he has no information suggesting his vehicle collided with the oncoming vehicle nor does he recall a collision. [ 16 ] He believes the other vehicle left the scene, and he has no information as to the identity of the driver or the owner of it. [ 17 ] Mr. Funk retained and instructed counsel to advance a claim on his behalf for the injuries and other losses he suffered from the rollover.

He came to understand that as the identity of the other driver and vehicle were not known, his compensatory recovery was statutorily limited to $200,000, pursuant to the Motor Vehicle Accident Claims Act , RSA 2000, c M-22. Accordingly, he instructed his legal counsel to advance a claim against Wawanesa for coverage under the Endorsement, anticipating there would be a deficiency between his losses and any potential damages he might recover statutorily. [ 18 ] He settled his claim with the Motor Vehicle Accidents Claim Fund for the statutory limit of $200,000 plus costs.

However, he assessed his claim in excess of $1,000,000, and sought the balance under the Endorsement. [ 19 ] Mr. Funk’s uncle attended the scene on May 23, 2008. He took photographs of tire tracks leading from the road into the ditch and the ground disturbances from the rollover. These were supplied to Donald K. Pohl, an accident reconstruction engineer, who prepared a report. [ 20 ] Mr. Pohl concluded that the high angle of entry into the ditch indicated an evasive maneuver, which would require turning of the steering wheel approximately 90 degrees to the right. Mr.

Pohl concluded the ditch entry angle was consistent with the recollection of the Plaintiff that he steered to the right to avoid an oncoming vehicle. [ 21 ] Wawanesa in turn filed an expert’s report in which the expert concluded there was no damage to the Jeep to support that it was physically contacted by another vehicle before entering the ditch. [ 22 ] Upon Mr. Funk advancing his claim for coverage under the Endorsement, Wawanesa denied his claim on the grounds that the vehicle Mr. Funk alleges came towards him does not meet the definition of an “unidentified automobile,” as defined in his insurance policy.

The Policy Wording [ 23 ]

Section 2 of the insuring agreement clause in the Endorsement reads: In consideration of the premium charged and subject to the provisions hereof, it is understood and agreed that the Insurer shall indemnify each eligible claimant for the amount that such eligible claimant is legally entitled to recover from an inadequately insured motorist as compensatory damages in respect of bodily injury or death sustained by an insured person by accident arising out of the use or operation of an automobile. ( emphasis added )

[24]

Section 1 of the Endorsement defines the term “inadequately insured motorist”: 1(

e) The term inadequately insured motorist means: ... ii. the driver or owner of an uninsured automobile or unidentified automobile as defined in the “Uninsured Automobile Coverage” ofthe Policy. Provided That ... C. where an eligible claimant alleges that both the owner and driver of an automobile referred to in 1(e)(ii) cannot be determined, theeligible claimant’s own evidence of the involvement of such automobile must be corroborated by other material evidence; and D. “other material evidence” for the purposes of this

section means: i. independent witness evidence, other than evidence of a spouse as defined in this endorsement or a dependent relative as defined inthis endorsement; or ii. Physical evidence indicating the involvement of an unidentified automobile. [25]

Section B of the Standard Policy deals with Accident Benefits. That

section defines the term unidentified automobile in itsSubsection 3 – Uninsured Motorist Cover as follows:

(3) An unidentified automobile under this subsection means an automobile which causes bodily injury or death to an insured personarising out of physical contact of such automobile with the automobile of which the insured person is an occupant at the time of theaccident, provided (

a) the identity of either the owner or driver of such automobile cannot be ascertained... (emphasis added) Law [26] Rule 7.3 (1)(

b) of the Alberta Rules of Court, Alta Reg 124/2010 provides that a party may apply to the Court for

summaryjudgment in respect of all or part of a claim on the ground that there is no merit to a claim or part of it. This rule invites “a broad,practical and holistic approach to

summary judgement applications”: Clear Hills Development Corporation v Horseman, 2016 ABQB341 at para 5; citing WP v Alberta, 2014 ABCA 404 at para 25, 588 AR 110. [27] The modern test for

summary judgment is for the court to examine the record to see if a disposition that is fair and just to bothparties can be made on the existing record: Hryniak v Mauldin, 2014 SCC 8, [2014] 1 SCR 87. From the process perspective,

summaryjudgment can be given if a disposition that is fair and just to both parties can be made on the existing record by using that alternativemethod for adjudication. From the substantive perspective,

summary judgment can be granted if, in light of what that fair and justprocess reveals, there is no merit to the claim: 776826 Alberta Ltd v Ostrowercha, 2015 ABCA 49 at paras 9-13, 593 AR 391; citingWindsor v CPR, 2014 ABCA 108 at para 13, 572 AR 317. [28] The parties agree the Court should, when interpreting an insurance policy, follow the two-step procedure in Consolidated-Bathurst v Mutual Boiler, (SCC), [1980] 1 SCR 888, 112 DLR (3d) 49. At the first step, effect must be given to theintention of the parties taken from the words of the contract.

At step two, if the Court has found ambiguity, it must resolve the ambiguity. [29] The Court resolves any doubt as to the meaning and scope of the excluding or limiting term of the contract by the applicationof the contra proferentem doctrine against the party inserting the clause and now relying upon it. [30] Apart from that doctrine, the Court must apply the normal rules of construction in order to reach an

interpretation which, fromthe whole of the contract, would tend to advance or promote the intention of the parties upon the making of the contract. Positions of the Parties [31] Mr. Funk and Wawanesa disagree as to whether at the first step of the

interpretation procedure any ambiguity exists regardingthe definition of an “unidentified automobile.” [32] Mr. Funk sets out his position in paragraphs 32 and 33 of his Written Brief as follows: 32. However, the definition in the SPF #1 is entirely different from that set out in the SEF 44. Specifically, the SPF #1 sets out anevidentiary condition that is different from the requirements stipulated in the SEF 44, yet it is somehow supposed to be included in theSEF 44. 33.

The SPF #1 refers to physical contact between the insured’s vehicle and the unidentified vehicle, whereas the SEF 44 refers tocorroboration of the unidentified vehicle by physical evidence [which] indicates the involvement of an unidentified automobile. Theseare two separate and distinct tests. They are not compatible, nor reconcilable. [33] Whereas, Wawanesa submits the plain and ordinary meaning of the phrase “arising out of physical contact of such automobile

with the automobile of which the insured person is an occupant” excludes coverage for Mr. Funk in these circumstances, where he allegedly avoided contact with an unidentified vehicle, because the insured’s vehicle and the unidentified vehicle did not make physical contact. [ 34 ] Mr. Funk argues that Justice Sanderman dealt with this issue of

interpretation in the case of Poulin v Wawanesa Mutual Insurance Company , 2016 ABQB 547 , 44 Alta LR (6th) 374 ( Poulin ), finding an ambiguity. [ 35 ] In my view, Sanderman J dealt with the definition of “inadequately insured motorist,” which was defined differently in the endorsement and in the policy: Ibid at para 10. As such, Poulin is distinguishable from the present case. [ 36 ] Mr.

Funk argues that because subsections 1(e)(ii) C and D of the Endorsement require corroboration by physical evidence while the Standard Policy refers to physical contact, the two sections create different tests, and thereby cause an ambiguity. [ 37 ] The Standard Policy definition, he argues, is much stricter and restrictive than the one found in the Endorsement. One Definition Exists [ 38 ] Interestingly, although the Endorsement refers to the definition of an “unidentified automobile” as defined in the “Uninsured Automobile Coverage”

section of the Standard Policy, no such heading exists in the Standard Policy. Nonetheless, the parties take no issue with the only such definition found under “Subsection 3 – Uninsured Motorist Cover,” there being no other definition of “unidentified automobile” in the Standard Policy. [ 39 ] “Unidentified automobile” has no definition in the Endorsement. Rather, the Endorsement incorporates by reference the definition in the Standard Policy. Consequently, the definition in the Endorsement cannot be ambiguous.

The definition in the Endorsement is identical to the one in the Standard Policy. [ 40 ] The Standard Policy states that an “unidentified automobile” means an automobile which causes bodily injury or death to an insured person arising out of physical contact of such automobile with the automobile of which the insured person is an occupant at the time of the accident. ( emphasis added ) [ 41 ] The words “physical contact” can only refer to a situation where the unidentified automobile and the one occupied by the insured must, during their encounter, touch one another. [ 42 ] Thus, Mr. Funk’s

interpretation of those words is incorrect because his interpretive approach takes the evidentiary requirement of corroboration of physical contact, as required under clauses C and D of the Endorsement, and incorporates it, wrongly, as part of the definition of “uninsured automobile,” specified in the Standard Policy. That use of clauses C and D makes no sense because D(ii) refers to physical evidence indicating the involvement of an unidentified automobile. [ 43 ] In other words, Mr. Funk’s

interpretation conflates the issue of entitlement to coverage with the separate issue of the evidence required to establish his claim for coverage. Clauses C and D describe a standard of proof for the physical contact required in the definition of an unidentified automobile.

They do not form part of the definition. [ 44 ] The Supreme Court of Canada in Consolidated-Bathurst at 899, quoting from ( Pense v Northern Life Assurance Company (1907), 15 OLR 131 at 137, 1907 CarswellOnt 285 ), commented that: There is no just reason for applying any different rule of construction to a contract of insurance from that of a contract of any other kind; and there can be no sort of excuse for casting a doubt upon the meaning of such a contract with a view to solving it against the insurer, however much the claim against him may play upon the chords of sympathy, or touch on natural bias.

In such a contract, just as in all other contracts, effect must be given to the intention of the parties, to be gathered from the words they have used. [ 45 ] Recently, our Supreme Court reaffirmed this position in Ledcor Construction Ltd v Northbridge Indemnity Insurance Co , 2016 SCC 37 at para 49 , [2016] 2 SCR 23: The parties agree that the governing principles of

interpretation applicable to insurance policies are those summarized by Rothstein J. in [ Progressive Homes Ltd v Lombard General Insurance Co of Canada , 2010 SCC 33 , [2010] 2 SCR 245] . The primary interpretive principle is that where the language of the insurance policy is unambiguous, effect should be given to that clear language, reading the contract as a whole. [ 46 ] In the present matter, only one definition exists. There is no ambiguity reading the contract as a whole.

The Standard Policy sets out the definition, and the Endorsement incorporates that definition by reference. [ 47 ] The words “physical contact” require just that – touching of surfaces – between the two vehicles. Unjust or Unreasonable Result [ 48 ] Since there is no ambiguity in the meaning of the term “physical contact,” the alternative issue raised by Mr.

Funk during oral arguments is whether the application of that term, in the circumstances of the insured’s accident, as contained in the insurance contract, is unjust or unreasonable as not to be binding on the insured, pursuant to the provision of s 545(1) of the Insurance Act , RSA 2000, c I-3. [ 49 ] For the purpose of my analysis in this Judgment, s 545(1) of the Insurance Act reads:

If a contract contains a [term, the term,] is not binding on the insured if it is held to be unjust or unreasonable by the Court before which a question relating to it is tried. [ 50 ] On its face, this

section permits the Court to relieve an individual from a binding contractual term if the Court finds the term unreasonable. [ 51 ] A similar provision in the Nova Scotia Insurance Act , RSNS 1989, c 231 , was analyzed in Marche v Halifax Insurance Co , 2005 SCC 6 , [2005] 1 SCR 47 ( Marche ). [ 52 ] Marche dealt with the statutory insurance condition requiring an insured to inform the insurer of a material change to the risk, which the insurer argued was created by leaving the insured property vacant. The insured had not informed the insurer of the vacancy, a vacancy that was uneventful.

The property was destroyed by fire after a tenant had moved in and the insurer sought to invalidate coverage because of the earlier failure to inform. At paras 10-12, McLachlin CJ framed the issues as: For others, the question is whether s. 171 [i.e. the similar provision to Alberta’s s 545] applies not only to delete conditions that are unreasonable on their face (should there be any), but also to relieve against the results of applying conditions that, in the particular circumstances of the case, are unreasonable in their application or draconian in their consequences .

Framed in these terms, the question takes on an entirely different complexion – which I find more attractive because it avoids an inequitable result otherwise inescapable. The wording of s. 171 permits the issue to be characterized either way, but the second, in my view, better corresponds with the remedial objectives of the provision. It follows that the essential question is whether s. 171 applies to statutory conditions that are unreasonable or unjust in their application.

For the reasons that follow, I conclude that it does. ( emphasis added ) [ 53 ] The Supreme Court confirmed that s 171 was intended to provide relief from unjust conditions and should be interpreted broadly to apply to both statutory and contractual provisions; and further, that a condition may be reasonable on its face and unjust in the particular circumstances.

It upheld the trial judge’s conclusion that the Court should relieve against any injustice. [ 54 ] Given the intention of parties to this type of insurance coverage, which is to compensate the insured person injured as a result of an incident involving an unidentified automobile, it seems unreasonable to enforce a term of the contract that demands physical contact between the insured motor vehicle and the unidentified automobile, notwithstanding the existence of physical evidence corroborating the fact that the relevant incident occurred as a result of the insured’s defensive driving action directed at avoiding physical contact with another vehicle. [ 55 ] An insured would expect coverage when he took steps to avoid physical contact and could provide evidence to corroborate those steps which led to the damages he has suffered.

An insured who could produce a witness or witnesses or physical evidence, or both, to corroborate his allegations of avoiding contact with an unidentified automobile would expect his own insurer to provide coverage under the Endorsement. [ 56 ] The effect of applying the “physical contact” portion of the definition in Mr.

Funk’s insurance policy generates an unreasonable outcome, where the insured who avoids physical contact in order to prevent an accident would have no coverage under the Endorsement, but the insured who takes no evasive action and physically contacts the unidentified vehicle has coverage. [ 57 ] Nevertheless, while I have concluded that the definition of “unidentified automobile” in the Endorsement, requiring “physical contact” between the insured’s automobile and the other automobile that caused the accident, would lead to an unreasonable result, the provision of the Insurance Act , s 545(1) as it currently exists in Alberta, was not applicable to automobile insurance at the time Mr.

Funk’s rollover accident occurred. In other words, Mr. Funk can only benefit from the retrospective application of s 545(1), where the legislature indicates the intention that the legislative provision applies retrospectively. [ 58 ] I now turn to examine the implication of the preceding paragraph. Section 545 (1) and Retrospectivity [ 59 ] Neither party dealt with the issue of retrospectivity in their original briefs. Counsel for Mr. Funk raised the point on s 545 during oral arguments.

Consequently, the parties were allowed time to file Supplemental Briefs in order to address the legal effect of that statutory provision. Wawanesa filed a Further Brief and Mr. Funk filed a Memo in response. [ 60 ] When Mr. Funk rolled his vehicle on May 20, 2008, s 545 (1) of the Insurance Act , RSA 2000, c I-3 did not exist. It came into force on July 1, 2012, pursuant to the Insurance Amendment Act , 2008 SA 2008, c 19 (see Proclamation, July 1, 2012,

(2011) A Gaz 1, 580-581). [ 61 ] However, at the date of Mr. Funk’s rollover, a similar section 552 (1) did appear in the Insurance Act , and it read: 552(1) When a contract a) ...

b) contains any stipulation, condition or a warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or maintenance of the insured property, the exclusion, stipulation, condition or warranty is not binding on the insured if it is held to be unjust or unreasonable by the court before which a question relating to it is tried.

[62] This s 552 provision was placed under Subpart 3 of

Part 5 governing contracts of fire insurance and fire insurance policies.Further, Subpart 3 was specifically excepted from applying to contracts for automobile insurance. The old s 552 did not apply toautomobile insurance on the date of Mr. Funk’s accident. [63] The law generally presumes against applying a statutory provision retrospectively when the provision affects substantiveissues implicating vested rights of the parties, absent a clear legislative indication to the contrary. In Gustavson Drilling

(1964) Ltd vMinister of National Revenue, (SCC), [1977] 1 SCR 271 at 279-282, 66 DLR (3d) 449, the Supreme Court commented,inter alia, as follows: First, retrospectivity. The general rule is that statutes are not to be construed as having retrospective operation unless such a constructionis expressly or by necessary implication required by the language of the Act. An amending enactment may provide that it shall bedeemed to have come into force on a date prior to its enactment or it may provide that it is to be operative with respect to transactionsoccurring prior to its enactment.

In those instances the statute operates retrospectively.... Second, interference with vested rights. The rule is that a statute should not be given a construction that would impair existing rights asregards person or property unless the language in which it is couched requires such a construction. [64] When Mr.

Funk rolled his vehicle, the right, if any, in respect of which he had to claim indemnity from Wawanesa, was asubstantive right. [65] In this regard, the Supreme Court in Angus v Sun Alliance Insurance Co, (SCC), [1988] 2 SCR 256 at paras19-21, 52 DLR (4th) 193 (Angus), observed that: A provision is substantive or procedural for the purposes of retrospective application not according to whether or not it is based upon alegal fiction, but according to whether or not it affects substantive rights. ...

Whatever may be the reasons for this, and whether one agrees or disagrees with them, the provision of a complete defence to an action,just as much as the creation of a cause of action itself, is a substantive matter. ... Normally, rules of procedure do not affect the content or existence of an action or defence (or right, obligation, or whatever else is thesubject of the legislation), but only the manner of its enforcement or use. (emphasis in original) [66] Thus, a cause of action is a substantive right. In this case, Mr.

Funk’s cause of action is his claim for indemnity fromWawanesa, following the injuries he suffered when his vehicle rolled. [67] In Somersall v Friedman, 2002 SCC 59 at para 30, [2002] 3 SCR 109, the Supreme Court said: The question, therefore, is when the obligation to indemnify comes into being. In my view, the answer must be that the insurer becomesobliged to make the payment the moment the claim of the insured against the tortfeasor comes into being, that is, at the time of theaccident.

At that moment, all of the conditions set out in the SEF 44 will be satisfied; death or bodily injury has occurred, negligentlycaused by an inadequately insured motorist. In other words, all of the conditions necessary to make out a claim in tort against theinadequately insured driver come into being at the moment of the accident. The SEF 44 means to compensate the insured for theexistence of such a claim against an inadequately insured driver. The obligation of the insurer, therefore, comes into being at the sametime as the obligation of the tortfeasor to pay damages. [68] Mr.

Funk’s substantive rights under the Endorsement crystallized at the time of the rollover; so did Wawanesa’s substantiverights. Those rights vested at the time of the rollover on May 20, 2008, and s 545(1) cannot be retroactively applied to interfere withthem. The similar provision in the old s 552 was only applicable – on the day of Mr.

Funk’s rollover – to contracts of fire insurance andfire insurance policies. [69] The Supreme Court in Angus at para 28, sets out the policy reasons for not applying statutes retrospectively: This case is a good illustration of the policy reasons why statutes should not be given retrospective operation in the absence of anintention to do so that is either expressed in, or is necessarily implied by the statute. Substantial rights of insurance companies areaffected by the decision of Galligan J. The reasoning regarding limitations Acts applies a fortiori to the situation of the insurancecompanies.

Insurance companies calculate their premiums according to known risk factors. When the rates for the contract in questionhere were calculated, it was known that this particular risk – a suit in tort by Diane Angus against her husband – was precluded by s. 7.The insurance company relied upon that knowledge in setting its rates. A retrospective change to that circumstance should not lightly beimplied.

In [Martin v Perrie, (SCC), [1986] 1 SCR 41], this Court held that the change of a limitation period for medicalmalpractice actions (from one year from the date of the Act to one year from the date of discovery of the damage) could not be givenretrospective effect since physicians could have relied on the older provision to order their affairs (e.g., by destroying records) in such away that they would be prejudiced by the change.

The analogy here, in my view, is clear. [70] Accordingly, although the plain reading of the definition of an “unidentified automobile” in the Endorsement risksencouraging unreasonable conduct, s 545(1) of the Insurance Act cannot assist Mr. Funk in this case because it came into effect (underPart 5, Subpart 1 – General Insurance Provisions) after Mr. Funk’s right to claim indemnity under the Endorsement arose. [71] In the result, s 545(1) of the Insurance Act cannot apply retrospectively so as to alter whatever rights accrued to Mr. Funk atthe time of the rollover.

[72] This conclusion, however, does not, in these circumstances, end the analysis. Public Policy Consideration [73] Notwithstanding the fact that s 545 was not available to Mr. Funk at the time of the rollover, this Court is persuaded that therequirement of “physical contact” in the Endorsement would have resulted in the commission of a tortious act by the insured contrary topublic policy. Rather than encouraging defensive driving on the part of the insured in order to avoid a collision, the provision of theEndorsement requires “physical contact” with the other automobile, creating a situation which obliges Mr.

Funk to somehow makephysical contact with the other automobile in order to benefit from insurance coverage by Wawanesa. [74] Applying the “physical contact” portion of the definition in Mr. Funk’s insurance policy would produce a result at odds withpublic policy.

Effectively, the insured who avoids physical contact has no coverage under the endorsement, but the insured who takes noevasive action and physically contacts the unidentified vehicle has coverage. [75] Courts have generally refused to enforce the term of a contract that would make the insured commit a tortious act: Brazier vColumbia Fishing Resort Group Corp (1997), (BC SC), 33 BCLR (3d) 293 at paras 16-17, 1997 CarswellBC 1000(BC Supreme Court), leave to appeal to BCCA refused (1997), 1997 CarswellBC 1431.

In the case, the BC Supreme Court observed: In describing common law illegality, Waddams sets out a number of contracts which the court has declined to enforce. Those includecontracts to commit a criminal offence or a tortious act... ... In this regard, Waddams concludes at p. 374: Even though an agreement does not actually require, for its performance, the commission of an illegal act, it may be struck down if ittends to facilitate an illegality. ...

In dealing with the philosophical basis for the scope of the power of the Court to intervene for reasons of public policy, Waddamsconcludes: The assertion of such a wide power does not, of course, imply that it should be used arbitrarily or irrationally, but the recognition of thetrue basis for decisions, even though the principle is vague and general tends, it is suggested, towards a rational system of justice andtherefore in the long run to stability and certainty.

If it is recognized, for example, that the court interferes with an agreement not, as itwere, automatically, because it falls into some established category, but only because on balance the desirability of enforcement isoutweighed by other considerations important to society, several consequences follow. First, the heads of public policy may be extendedor restricted according to the changing values of society.

Secondly, the approach of the court to the consequences of the illegalagreement will require a similar balancing process.... (emphasis added) [76] On balance, the desirability of enforcing the contractual term and the requirement of “physical contact” in the Endorsement isoutweighed by the need to encourage or facilitate conduct that is not contrary to public policy.

That is, the promotion of defensivedriving on the part of the insured in a manner that avoids collision is more beneficial to the society than encouraging the insured tocollide with another automobile in order to benefit from insurance coverage. [77] The common definition of an “unidentified automobile” in the Endorsement and the Standard Policy produces in thesecircumstances a strange result.

Including the requirement of “physical contact” – between the unidentified automobile and the insuredwho avoided contact – leaves the insured with no opportunity to access coverage, as intended by the insuring agreement, even though theinsured can produce the otherwise required corroborating evidence supporting his allegations. This seems to encourage or facilitateconduct contrary to public policy: i.e. a collision provides coverage, but avoiding a collision does not. [78] Following this to its logical result leaves the insurer in a most desirable position.

If an insured deliberately makes contact herisks losing coverage for his deliberate act. If he avoids contact he loses coverage for driving defensively. Having found no legalequivalent to more eloquently state it, the position of the insurer is, “heads I win, tails you lose”. [79] Consequently, I find that the enforcement of the “physical contact” term in the Endorsement will tend to lead to a resultcontrary to public policy; and as such should not be enforced: Brazier at paras 16-17.

Exercise of Equitable Jurisdiction [80] Aside from the fact that the enforcement of the “physical contact” term in the Endorsement will produce a result contrary topublic policy, I note the courts in Alberta (and other Canadian provinces) are mandated to administer concurrently all rules of equity andthe common law: Judicature Act, RSA 2000, c J-2, s 16; CED Equity I.1.(a), §1. [81] Relief against penalties and forfeitures is an established equitable doctrine or rule of equity.

This Court is statutorilyempowered “to relieve against all penalties and forfeitures and, in granting relief, to impose any terms as to costs, expenses, damages,compensation and all other matters that the Court sees fit”: Judicature Act, s 10. [82] Relief from forfeiture simply refers to the power of a court to protect a person against the loss of an interest or a right becauseof a failure to perform a covenant or condition in an agreement or contract: Kozel v Personal Insurance Co, 2014 ONCA 130 at para 28,

119 OR (3d) 55 (Kozel). In the present matter, Mr. Funk runs the risk of losing his insurance coverage interest because of his failure tomake physical contact with the unidentified automobile that he claims caused the injuries he suffered from the rollover, as required bythe Endorsement. [83] Relief from forfeiture is available in an insurance context: Mohr v Paul Revere Life Insurance Co (1999), 11 CCLI (3d) 249at paras 39-41, 44, (BCSC). [84] The Supreme Court directs that in exercising its discretion to grant relief from forfeiture, a court must consider three factors:(

i) the conduct of the applicant, (ii) the gravity of the breach, and (iii) the disparity between the value of the property forfeited and thedamage caused by the breach: Saskatchewan River Bungalows Ltd v Maritime Life Assurance Co, (SCC), [1994] 2SCR 490 at para 32, 115 DLR (4th) 478 (WL) (Saskatchewan Bungalows); Kozel at para 31. On the existing record there are noarguments or evidence from parties as to the reasonableness or otherwise of Mr. Funk’s conduct; although it seems to me that, if proven,a defensive driving maneuver seeking to avoid collision would be characterized as reasonable conduct.

While the issue of unpaidpremiums does not appear relevant in the present matter, the value of Mr. Funk’s loss of insurance coverage is potentially of a significantmagnitude where his defensive driving is considered a breach of his insurance policy. [85] The modified application of the test prescribed in Saskatchewan Bungalows to Mr.

Funk’s case and my conclusion that theenforcement of the “physical contact” term in the Endorsement will lead to a result contrary to public policy, show there is merit to Mr.Funk’s claim for coverage under the Endorsement. [86] The decision to exercise the Court’s equitable jurisdiction to relieve Mr. Funk from forfeiting his insurance coverage isinformed by the Court’s refusal to enforce a contractual term that would lead to a result contrary to public policy, not by sympathy. [87] In addition, although I have concluded earlier that s 545 was not operative at the time of Mr.

Funk’s rollover and cannot beapplied retroactively, I note that it is now applicable to every contract [of insurance] made in Alberta other than a contract of (

a) lifeinsurance, (

b) accident and sickness insurance, or (

c) reinsurance: Ibid, s 513. Thus, the current application of s 545 to contracts ofautomobile insurance precludes the notion that the exercise of the Court’s equitable jurisdiction in the circumstances of Mr. Funk’smatter might potentially open the floodgates, because it is a rare occasion where a contract produces a result which is contrary to publicpolicy. Disposition [88] Accordingly, for the reasons I have set out: (

i) Wawanesa’s application for

summary dismissal of Mr. Funk’s claim for coverage is denied; and (ii) a declaratory order is granted in favour of Mr. Funk to the effect that he has coverage under the Endorsement. [89] Mr. Funk argued he should not only have coverage but should be granted

summary judgment with respect to liability againstWawanesa under the Endorsement. He submits the matter should then be set for assessment of his damages. The circumstances of thiscase do not support his position. [90] Although I have concluded that Mr. Funk has coverage under the Endorsement, given the evidence adduced by him I am notsatisfied that a disposition that is fair and just to both parties can be made on the existing record. A trial court should deal with Mr.Funk’s credibility and the expert evidence he offers. [91] Mr. Funk’s application for

summary judgment, with respect to liability, is denied. [92] In the result, I direct that the matter as it relates to liability and damages should proceed to trial. Heard on the 16th day of March, 2017. Dated at the City of Edmonton, Alberta this 8th day of May, 2017. E.J. Simpson J.C.Q.B.A. Appearances: Timothy R. Wood

Engelking Wood for the Plaintiff / Respondent / Cross-Applicant Wendy N. Moody Dentons Canada LLP for the Defendant / Applicant / Cross-Respondent