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Patterson v. Gallant, [1994] 3 S.C.R. 1080

 

Co-operators General Insurance Company                                     Appellant

 

v.

 

Judgment Recovery (P.E.I.) Ltd.                                                      Respondent

 

Indexed as:  Patterson v. Gallant

 

File No.:  23502.

 

1994:  October 31; 1994:  December 15.

 


Present:  La Forest, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major JJ.

 

on appeal from the prince edward island supreme court, appeal division

 

                   Insurance -- Automobile insurance -- Renewal -- Policy lapse -- Insurer mailing offer to renew and "pink card" to insured -- Insured failing to pay renewal premium due by time specified -- Insurer not sending notice of termination -- Insured involved in accident after insurance had expired -- Whether insurer liable -- Whether "pink card" constitutes insurance policy -- Insurance Act, R.S.P.E.I. 1988, c. I-4, ss. 216(8), 218(6).

 

                   The insured was the owner and operator of an automobile which collided with another vehicle on February 20, 1989, causing personal injuries to the plaintiffs.  About a month prior to the February 5, 1989 expiry date of the insured's standard auto insurance policy, Co‑operators, the insurer, had sent him a premium notice/offer to renew which indicated that the policy would be renewed if the premium was paid by February 5.  Included with the offer to renew was an insurance card ("pink card") issued under s. 216(8) of the Insurance Act and valid for the full six‑month renewal period.  The insured did not pay the renewal premium due by the time specified.  Had he paid the premium, Co‑operators would have issued him an automobile renewal receipt along with a second "pink card" identical to the one sent with the offer to renew.  Under s. 218(6) of the Act, the renewal receipt would have functioned as a renewal certificate  and been the equivalent of a policy.  The insured did not receive a notice of termination from Co‑operators pursuant to Statutory Condition 8(1) of the Act.  Co‑operators and the respondent were added as interveners in the plaintiffs' action against the insured.  Co‑operators took the position that the policy had not been renewed and that consequently it was not liable.  The dispute was referred to the Court of Appeal as a special case.  The court ruled that Co‑operators had delivered the insured an insurance policy by sending him a "pink card" and was therefore bound to cover him even though he had not paid his renewal premium.

 

                   Held:  The appeal should be allowed.

 

                   In renewals of automobile insurance policies, a separate and distinct contract comes into existence at each renewal, with its own offer and acceptance.  Under the two‑step renewal process employed by Co‑operators in this case, the documentation mailed to the insured was an offer of insurance coverage.  The offer to renew did not purport to be a binding insurance policy, as it specifically stated that coverage would be renewed only if the renewal premium were paid.  The documentation sent was not the equivalent of a renewal certificate and hence an insurance policy within the meaning of s. 218(6) of the Insurance Act.  A new pink card is sent with the offer to renew as a convenience to the insured, since under the Highway Traffic Act drivers are required to carry valid pink cards at all times.  The pink card by itself does not bind the insurer in the absence of an underlying insurance policy.  The fact that the pink card is not listed in the definition of "contract" in s. 1(d.2) of the Insurance Act shows that a pink card, properly used, serves only to indicate the existence of an underlying policy.  Section 216(8) refers to the insurer issuing a card when it issues or delivers a policy or renewal.  The pink card thus seems to be an additional requirement and does not by itself constitute insurance.  Finally, s. 324(1) of the Highway Traffic Act, which makes it an offence to obtain the registration of a motor vehicle when it is not insured, contemplates the possibility of an individual presenting a seemingly valid pink card when he or she does not actually have insurance.  This lends further support to the conclusion that the pink card is not in itself an insurance policy.

 

                   It is unnecessary for Co‑operators to terminate or cancel the alleged insurance in accordance with Statutory Condition 8(1), since this is only necessary where there is a binding insurance policy.  In the absence of legislation to the contrary, which does not exist in this case, a lapsed policy does not need to be formally terminated.  If a third party reasonably relies on the existence of the pink card to its detriment, the insurer may be estopped from denying the existence of a binding insurance policy, but there was no evidence of such reliance in this case.

 

Cases Cited

 

                   Applied:  Bordeniuk v. Co‑operative Fire & Casualty Co. (1979), 101 D.L.R. (3d) 274; distinguished:  McDonnell v. Wawanesa Mutual Insurance Co., [1980] I.L.R. ¶ 1‑1206; not followed:  Colven Distributors Ltd. v. Allstate Insurance Co. (1992), 10 C.C.L.I. (2d) 157; referred to:  Tetterington v. Clarke, [1980] I.L.R. ¶ 1‑1216; Bohay v. Co‑operative Fire and Casualty Co. (1980), 27 A.R. 290; Skinner v. Goldapple, [1992] I.L.R. ¶ 1‑2809; Judgment Recovery (N.S.) Ltd. v. Home Insurance Co., [1978] I.L.R. ¶ 1‑976; Judgment Recovery (N.S.) Ltd. v. Co‑operative Fire and Casualty Co., [1979] I.L.R. ¶ 1‑1139; Seymour v. Wagstaff (1984), 52 N.B.R. (2d) 86.

 

Statutes and Regulations Cited

 

Highway Traffic Act, R.S.P.E.I. 1988, c. H-5, ss. 315, 324(1), (2), (3), (4).

 

Insurance Act, R.S.P.E.I. 1988, c. I‑4, ss. 1(d.2), (q), 96(1), 216(8), 218(6), 220(1), (2), Statutory Condition 8(1), 220(4), 240(4), (5).

 

Prince Edward Island Civil Procedure Rules.

 

                   APPEAL from a judgment of the Prince Edward Island Supreme Court, Appeal Division (1993), 105 Nfld. & P.E.I.R. 15, 331 A.P.R. 15, 44 M.V.R. (2d) 79, 17 C.C.L.I. (2d) 201, determining that the defendant's vehicle was insured at the time of the accident.  Appeal allowed.

 

                   Patrick L. Aylward, for the appellant.

 

                   Graham W. Stewart, Q.C., for the respondent.

 

                   The judgment of the Court was delivered by

 

                   Major J. --

 

I.  Facts

 

                   The appellant, Co-operators General Insurance Company ("Co-operators"), were the automobile insurers of Eugene Dale Gallant. About a month prior to the February 5, 1989 expiry date of the insurance, Co-operators mailed Gallant a document which consisted of four detachable sections.  The first section was headed "Automobile Premium Notice/Offer to Renew", and indicated that the automobile insurance policy would be renewed if the premium were paid by 12:01 a.m. on February 5, 1989.  The second section was an insurance card ("pink slip" or "pink card") issued pursuant to the provisions of s. 216(8) of the Insurance Act, R.S.P.E.I. 1988, c. I-4.  The third section contained particulars of the insurance coverage to be kept by the insured (Gallant), and the fourth section contained a form to be completed if the insured was paying the premium by credit card.

 

                   Gallant did not pay the renewal premium due by the time specified in the "Automobile Premium Notice/Offer to Renew".  Had Gallant paid the premium, Co-operators would have issued him a document entitled "Automobile Renewal Receipt", along with a second "pink slip" or "pink card" identical to the first one sent with the "Automobile Premium Notice/Offer to Renew".  The Automobile Renewal Receipt would have functioned as a "renewal certificate" or "renewal receipt" within the meaning of s. 218(6) of the Insurance Act; it would be the equivalent of a policy such that an insurer would not have to issue a complete copy of the standard owner's policy upon each renewal.

 

                   Gallant did not receive a notice of termination from Co-operators pursuant to Statutory Condition 8(1) of the Insurance Act.

 

                   This action was commenced by Originating Notice.  Brenda Patterson and Robin Perry sued Gallant for injuries they sustained in a motor vehicle collision on February 20, 1989.  Co-operators and Judgment Recovery (P.E.I.) Ltd. ("Judgment Recovery") were added as interveners.  Co-operators took the position that Gallant's policy had not been renewed, and thus it was not liable.  Judgment Recovery intervened on Gallant's behalf, and claimed that the policy had been renewed.

 

                   The appellant and the respondent made an application to have the dispute determined by the provincial Court of Appeal at first instance as a Special Case under the Prince Edward Island Civil Procedure Rules.  The application was granted.  The question for the opinion of the court was as follows:

 

At the time of the motor vehicle accident referred to in the Plaintiff's Statement of Claim, was the Defendant's vehicle insured under a policy of automobile insurance by the terms of which the insurer is liable to pay in whole or in part the amount of a judgment for damages pursuant to Subsection 330(1)(e) of the Highway Traffic Act?

 

On February 8, 1993, the Appeal Division of the Supreme Court of Prince Edward Island ruled that the appellant had delivered the insured (Gallant) an insurance policy by sending him an insurance card ("pink slip" or "pink card") and was therefore bound to cover him even though he had not paid his renewal premium:  (1993), 105 Nfld. & P.E.I.R. 15, 331 A.P.R. 15, 44 M.V.R. (2d) 79, 17 C.C.L.I. (2d) 201.

 

II.  Legislation

 

                   Insurance Act, R.S.P.E.I. 1988, c. I-4

 

1.  In this Act

 

                                                                    ...

 

(d.2) "contract" means a contract of insurance and includes a policy, certificate, interim receipt, renewal receipt, or writing evidencing the contract, whether sealed or not, and a binding oral agreement;

 

                                                                    ...

 

(q) "policy" means the instrument evidencing a contract;

 

96. (1)  Where the policy has been delivered, the contract is as binding on the insurer as if the premium had been paid, although it has not in fact been paid, and although delivered by an officer or agent of the insurer who had not authority to deliver it.

 

216. ...

 

                   (8)  An insurer that issues or delivers an owner's policy in the province, or any renewal thereof, or any evidence of the continuation of the policy, shall issue to the insured a card evidencing the insurance; and the card shall be in a form approved by the Superintendent.

 

218. ...

 

                   (6)  Where an insurer adopts the standard owner's policy, it may, instead of issuing the policy, issue a certificate in form approved by the Superintendent which when issued shall be of the same force and effect as if it was in fact the standard owner's policy, subject to the limits and coverages shown thereon by the insurer and any endorsements issued concurrently therewith or subsequent thereto, but at the request of an insured at any time, the insurer shall provide a copy of the standard owner's policy wording as approved by the Superintendent.

 

220. (1)  Subject to subsection 216(3), section 221 and section 243(2),

 

(a)  the conditions set forth in this section are statutory conditions and shall be deemed to be part of every contract and shall be printed in every policy with the heading "Statutory Conditions";

 

(b)  no variation or omission of or addition to a statutory condition is binding on the insured.

 

                   (2)  In this section "policy" does not include an interim receipt or binder.

 

                                             STATUTORY CONDITIONS

 

                                                                    ...

 

8. (1)  This contract may be terminated

 

(a)  by the insurer giving to the insured fifteen days notice of termination by registered mail, or five days written notice of termination personally delivered;

 

(b)  by the insured at any time on request.

 

240. ...

 

                   (4)  The right of a person who is entitled under subsection (1) to have insurance money applied upon his judgment or claim is not prejudiced by

 

(a)  an assignment, waiver, surrender, cancellation, or discharge of the contract, or of any interest therein or of the proceeds thereof, made by the insurer after the happenings of that event giving rise to a claim under the contract;

 

(b)  any act or default of the insured before or after that event in contravention of this Part or of the terms of the contract; or

 

(c)  any contravention of the Criminal Code  [citation omitted] or statute of any province or territory of Canada ...

 

and nothing mentioned in clauses (a), (b), and (c) is available to the insurer as a defence in an action brought under subsection (1).

 

                   (5)  It is not a defence to an action under this section that an instrument issued as a motor vehicle liability policy by a person engaged in the business of an insurer, and alleged by a party to the action to be such a policy, is not a motor vehicle liability policy, and this section applies, with the necessary changes, to the instrument.

 

Highway Traffic Act, R.S.P.E.I. 1988, c. H-5

 

315.  Evidence that a motor vehicle is an insured motor vehicle shall be deemed to be given on the production of

 

(a)  a motor vehicle liability insurance card as prescribed by subsection 216(8) of the Insurance Act; or

 

(b)  the certificate of the Minister of Finance that a bond has been made pursuant to section 314.

 

324. (1)  Any person who obtains the registration of a motor vehicle when it is not an insured motor vehicle is guilty of an offence.

 

                   (2)  A registered owner of a motor vehicle that is not an insured motor vehicle who

 

(a)  operates that motor vehicle on a highway; or

 

(b) permits any other person to operate that motor vehicle on a highway,

 

is guilty of an offence.

 

                   (3)  Every person who operates a motor vehicle that is not an insured motor vehicle is guilty of an offence.

 

                   (4)  Every person who operates a motor vehicle shall carry in the motor vehicle a card in a form approved by the Registrar evidencing particulars of the insurance on the motor vehicle, and such person shall forthwith deliver that card to a peace officer for the inspection of the peace officer, when the peace officer requests him to do so.

 

III. Judgments

 

Prince Edward Island Supreme Court, Appeal Division

 

                   Mitchell J.A., in response to the question submitted to the court, noted that Co-operators had delivered a pink card to Gallant in accordance with s. 216(8) of the Insurance Act.  This card is intended to provide evidence of the existence of a contract of insurance.  The card Co-operators sent to Gallant contained the following particulars of insurance:  the policy number, the name and address of the insurer and the insured, and the year, make and serial number of the vehicle insured.  It also stated that the policy would be in effect from February 5, 1989 to August 5, 1989. The back of the card contained the following statement:

 

                   This certifies that the party named herein is insured against liability for bodily injury and property damage by reason of the operation of the motor vehicle described herein, in an amount not less than the statutory minimum requirements in any area of Canada. . . .

 

                   This card should be carried in the insured vehicle for production as proof of insurance when demanded by police.

 

The court then concluded that this insurance card constituted a policy within the meaning of the Insurance Act because "policy" is defined in s. 1(q) as an instrument evidencing a contract of insurance.  This gives effect to s. 96, which provides that once a policy has been delivered, the contract of insurance is as binding on the insurer as if the premium had been paid even when it has not.

 

                   The court found that once Co-operators mailed the insurance card to Gallant, it became his insurer, and as bound to cover him as if he had paid the premium. It further found that the policy had not been cancelled at the time of the accident on or about February 20, 1989.

 

                   Additionally, it was decided that although the pink card was accompanied by a notice indicating that the insurance would be renewed if the premium were paid by a certain time, that did not alter the legal effect of delivering the pink card. This conclusion was reached on the basis that an insurer knows that having an insurance card issued pursuant to s. 216(8) of the Insurance Act enables a person such as Gallant to hold himself out as insured to the police, the registrar of motor vehicles and third parties. Nothing in the pink card issued by Co-operators indicated that the insurance was conditional or not in effect.  On the contrary, the card stated that coverage did not expire until August 5, 1989.  Accordingly, s. 96 of the Insurance Act obliged Co-operators to provide the same coverage as it would have had Gallant paid his renewal premium.

 

IV.  Issues

 

1.Is a pink card a policy of insurance?

 

2.Does the two-step renewal process utilized by the appellant cause it to incur an obligation of coverage if the insurance premium is not paid?

 

V.  Analysis

 

                   An important issue in this appeal is the meaning of "renewal" of an automobile insurance policy and what documents may constitute such a renewal.  As well the appeal raises the issue of whether a "pink card" should be construed as a binding policy of insurance. Every insurer, in providing automobile insurance, is required to issue a "pink card" in order to permit the vehicle owner to comply with the Highway Traffic Act's obligation to carry a pink card at all times.

 

                   Two separate meanings can be ascribed to a "renewal" of an insurance policy.  The first meaning results from a continuous policy.  Such policies provide for further extensions to the term of an existing contract, subject to the rights of either of the parties to terminate the contract.  In a single continuous policy, questions of formation are answered by reference to the original offer and acceptance that initiated the coverage.  By contrast, the other meaning of a "renewal" of an insurance policy involves the situation where a separate and distinct contract comes into existence at each renewal.  Automobile insurance renewals fall into the latter category, in that each renewal represents a new contract with its own offer and acceptance.

 

                   The common law principles of offer and acceptance have, in certain circumstances, been altered by the operation of the Insurance Act:  even though a contract in the strict sense may not exist, if an insurer in fact issues a policy or a document that can be construed as a policy under the Insurance Act, the insurer cannot avoid liability on the ground that there was no contract.

 

                   The respondent takes the position that the renewal documentation sent by the appellant was in effect a policy and thus the appellant is bound by virtue of s. 96(1) of the Insurance Act, regardless of the fact that the renewal premium was not paid.

 

                   The appellant to the contrary argues that the renewal documentation was merely an offer to renew which could not ripen into a binding policy until such time as the premiums were paid.  The appellant contends that the documentation sent to the insured did not constitute a binding insurance policy within the meaning of the Insurance Act.

 

                   The appellant sent the insured an "Automobile Premium Notice/Offer to Renew" ("Offer to Renew") along with a new pink card valid for the full six-month renewal period.  The documentation stated that the policy would be renewed if the payment of the premium was received by February 5, 1989. As stated earlier, if the renewal premium had been paid, the appellant would have then  forwarded an "Automobile Renewal Receipt" along with a second pink card, identical to the pink card sent with the Offer to Renew.  The Automobile Renewal Receipt is the equivalent of a renewal certificate, and is a binding insurance policy by virtue of s. 218(6) of the Insurance Act.

 

                   The procedure of first mailing an offer to renew, and subsequently mailing a renewal receipt, is known as a two-step renewal process.  The actual renewal certificate or renewal receipt is only sent once the renewal premium is paid. The two-step renewal process employed by the appellant in the case on appeal is in contrast to the one-step renewal process where an insurer mails the actual renewal certificate and the premium notice in a single mailing.  In the one-step process, no further documents are sent after the renewal premium is paid.

 

                   The respondent contends that the appellant in the present case in effect used a one-step renewal process, and that the Offer to Renew, along with the pink card, functioned as the equivalent of an insurance policy within the meaning of s. 218(6) of the Insurance Act.  I do not agree.

 

                   The appellant mailed an Offer to Renew; the documentation was an offer of insurance coverage.  It was made clear on its face that the policy would be renewed if the renewal premium were paid on time.  The Offer to Renew sent to the insured did not purport to be a binding insurance policy regardless of the payment or non-payment of premiums.  It specifically stated that coverage would be renewed only if the renewal premium were paid.

 

                   The documentation sent to the insured did not purport to be, nor should it be construed to be, the equivalent of a renewal certificate and hence an insurance policy within the meaning of s. 218(6) of the Insurance Act.

 

                   It is true that the form of the Automobile Renewal Receipt would have similarities to the Offer to Renew that was sent to the insured but similarity of forms does not automatically elevate the Offer to Renew into a binding insurance policy.

 

                   It is a marketing technique to mail a new pink card with the offer to renew to enable an insured to use the pink card without interruption between the time of the expiry of the old policy and the start of the new policy.  For most consumers, receiving a new pink card with the offer to renew is a convenience; otherwise, they would have to wait until the insurer received their premiums and mailed a new card. This could result in an insured being without a valid pink card for a period of time and not being able to drive, since s. 324(4) of the Highway Traffic Act requires that a driver carry a pink card at all times. The other impractical option would be to pay renewal premiums further in advance.

 

                   The pink card by itself does not constitute a binding policy.  It is only an administrative requirement placed on an insurer under the Insurance Act to allow for compliance with the Highway Traffic Act.  The pink card by itself does not bind the insurer in the absence of an underlying insurance policy.

 

                   While various approaches have been taken by courts concerning the interpretation of renewal documentation, including pink cards, I adopt the reasons expressed by the Alberta Court of Appeal in Bordeniuk v. Co-operative Fire & Casualty Co. (1979), 101 D.L.R. (3d) 274.  In that case, an Auto Renewal Notice was sent to the insured advising that the policy would expire on April 27, 1974, but that payment of a stated premium would renew the policy for a further six months.  The Renewal Notice was accompanied by a pink card certifying that the insured had coverage for the period of April 27, 1974 to May 11, 1974. The insurer had adopted a policy that if the premiums were paid within 14 days following the date of expiration of a policy, the insured would have the benefit of uninterrupted coverage even though an accident occurred before payment was in fact made.  That accounted for the pink slip being issued for the limited grace period of April 27 to May 11.  An Auto Expiry Notice was sent to the insured three days before the expiration of the policy.  No response was received, and no premium was paid. Had the premium been paid, the insurer would have issued a Renewal Certificate for a further period of six months from April 27, 1974, and the insured would have been sent another pink card.

 

                   The Alberta Court of Appeal found that sending the Auto Renewal Notice and Auto Expiry Notice constituted offers which were not accepted, and therefore the policy had expired when the accident occurred on May 5, 1974, even though the pink card purported on its face to be valid until May 11, 1994.  The court found the pink card was not a binding insurance policy. As stated by McGillivray C.J.A., at p. 280:

 

                   The purpose of issuing a pink card for the interim period in anticipation of a renewal is a reasonable procedure, having commercial sense, and in my view it was not intended that it should be the equivalent of a policy, even though in another sense it might be some evidence of the existence of a policy.

 

This case and the case at bar are analogous, and the reasoning and result in Bordeniuk are equally applicable to the present appeal.

 

                   The court below concluded that the pink card constituted an insurance policy by virtue of the definitions of "contract" and "policy" found in s. 1 of the Insurance Act.  I disagree with that conclusion.  The pink card is a requirement of the Highway Traffic Act; it is used for administrative purposes as proof or evidence of insurance.  However, it is not the actual policy.  The definition of "contract" in s. 1(d.2) of the Insurance Act lists a number of items as constituting a "contract", including a policy, certificate, or receipt.  However, the pink card contemplated by s. 218(6) is not listed in that definition of "contract".

 

                   It was argued that the definitions of "contract" and "policy" are broad enough to bring the pink card within their scope, since they refer to a "writing" or an "instrument" evidencing a contract.  However, had the legislature wanted to include the pink card within the definition of "contract", it would have specifically listed the card in that definition.  That it did not is an obvious demonstration that the pink card, properly used, only serves the purpose of indicating the existence of an underlying policy.

 

                   The provision in s. 216(8) of the Insurance Act which creates the pink card refers to the insurer issuing a card when it issues or delivers a policy or a renewal thereof.  Thus, the pink card seems to be an additional requirement to the issuance and delivery of the policy itself; it does not by itself constitute insurance.

 

                   Section 324(1) of the Highway Traffic Act lends further support to the conclusion that the pink card is not in itself an insurance policy.  Section 324(1) makes it an offence to obtain the registration of a motor vehicle when it is not insured.  Thus, this subsection contemplates the possibility, inter alia, of an individual presenting a seemingly valid pink card who does not actually have insurance.  The policy and the pink card are two different documents.  A pink card is not the equivalent of an insurance policy.

 

                   While these conclusions dispose of the appeal there were other issues raised that deserve comment. I agree that the mere fact that there was no acceptance of the Offer to Renew does not finally answer the question of whether the documentation sent to the insured could constitute a binding policy.  It is not disputed that the provisions of the Insurance Act can override the common law of contract.  The respondent argued that by reason of ss. 216(8) and 218(6) of the Insurance Act, the pink card and Offer to Renew sent by the appellant evidenced a binding policy.

 

                   It was submitted that the documentation sent constituted a "certificate" within the meaning of s. 218(6). This argument fails as the "certificate" contemplated by s. 218(6) is the Automobile Renewal Receipt which would have been issued by the appellant had the premium been paid.  The Automobile Premium Notice/Offer to Renew cannot be construed as a liability policy.  Neither can the accompanying pink card qualify as a policy for the reasons already given.

 

                   In Bordeniuk it was argued that the Alberta equivalent of s. 240(4) of the Prince Edward Island Insurance Act was applicable to protect third party rights even though the insured may have assigned or cancelled his contract of insurance or defaulted on his obligations.  However, this section contemplates that a policy must be in existence before the provisions of the section can apply and is of no support for the proposition advanced that a pink card is the equivalent of a policy.

 

                   Once the court below found that a pink card was the equivalent of a policy, it concluded that s. 96(1) of the Insurance Act applied.  Section 96(1) provides that once a policy is delivered, non-payment of premiums by the insured will not allow the insurer to deny coverage.  This section was enacted by the legislature to protect against certain abuses which were taking place in the insurance industry.  For example, insurers had made a practice of delivering policies that were conditional on the receipt of the first premium.  This had several adverse results.  It made the time at which the risk attached uncertain.  It also made for some inequity in that the insurer would require a premium for the term as set out in the policy, but not be at risk for a portion of that time.  Thus, s. 96(1) provides that once a policy is delivered, it is binding on the insurer regardless of the non-payment of premiums.  However, a reading of the whole of s. 96 indicates that this section contemplates that the policy must first be issued and delivered and begs the question whether an offer to renew accompanied by a pink card is an insurance policy.  As previously stated, it is not.

 

                   I agree with the observations of the late McGillivray C.J.A. in Bordeniuk, supra, that to interpret the word "policy" in the manner proposed by the respondent would effect an extraordinary result. If, for instance, an insurer issued a policy and then, at the request of an insured, cancelled it and refunded the premium, the insurer would be entitled to deny coverage, even though the pink card might still be in the possession of the insured.  However, if the pink card were itself a policy this same result would not occur.

 

                   The case of McDonnell v. Wawanesa Mutual Insurance Co., [1980] I.L.R. ¶ 1-1206 (Alta. S.C.), is distinguishable on its facts as the insurer in that case employed a one-step renewal process and would not have sent any further documentation had the renewal premium been received.  The insurer in that case intended the renewal documentation to constitute the renewal certificate and hence an insurance policy.  The intent of the appellant in the present appeal was the exact opposite.

 

                   The Bordeniuk decision has been followed in subsequent jurisprudence dealing with these issues (e.g. Tetterington v. Clarke, [1980] I.L.R. ¶ 1-1216 (Alta. Q.B.), Bohay v. Co-operative Fire and Casualty Co. (1980), 27 A.R. 290 (Q.B.), and Skinner v. Goldapple, [1992] I.L.R. ¶ 1-2809 (Ont. Ct. (Gen. Div.)).  There are other cases which have reached the same result, but for different reasons (e.g. Judgment Recovery (N.S.) Ltd. v. Home Insurance Co., [1978] I.L.R. ¶ 1-976 (N.S.C.A.), and Judgment Recovery (N.S.) Ltd. v. Co-operative Fire and Casualty Co., [1979] I.L.R. ¶ 1-1139 (N.S.C.A.)). Some cases have traced both lines of authority (e.g. Seymour v. Wagstaff (1984), 52 N.B.R. (2d) 86 (T.D.)).

 

                   It is unnecessary for the appellant to terminate or cancel the alleged insurance in accordance with Statutory Condition 8(1).  This is only necessary where there is a binding insurance policy.  Where the policy simply expires because of the non-payment of the renewal premium, no formal termination procedure need be followed by the appellant. To the extent that Colven Distributors Ltd. v. Allstate Insurance Co. (1992), 10 C.C.L.I. (2d) 157 (Ont. Ct. (Gen. Div.)) decided otherwise it should not be followed. In the absence of legislation to the contrary, which does not exist in this case, a lapsed policy does not need to be formally terminated.

 

                   Although not an issue on the facts of this appeal, a question of reliance and estoppel may arise where an insurer issues a pink card for the full renewal term in circumstances where the premium is not paid and the policy lapses. By issuing a pink card, an insurer creates the opportunity that an insured who has let the policy lapse may hold out to third parties that insurance exists.  If a third party reasonably relies on the existence of the pink card to its detriment, the insurer may be estopped from denying the existence of a binding insurance policy. The question of estoppel does not have to be decided in the present case as there was no evidence of reliance by third parties on the pink card nor any evidence of actual prejudice suffered by third parties as a result of the actions of the appellant.

 

                   For the reasons stated the appeal is allowed with costs throughout.

 


                   Appeal allowed with costs.

 

                   Solicitors for the appellant:  Walker & Aylward, Summerside.

 

                   Solicitors for the respondent:  Campbell, Stewart, Charlottetown.

 

 

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