Supreme Court of Canada
Highway Victims Indemnity Fund v. Magnan, [1977] 1 S.C.R. 793
Date: 1976-01-30
Highway Victims Indemnity Fund (Defendant) Appellant;
and
Dame Alice Magnan (Plaintiff) Respondent.
1975: May 29; 1976: January 30.
Present: Judson, Ritchie, Pigeon, Dickson and Beetz JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Motor vehicles—Indemnity Fund—Failure of victim to recover medical expenses from her own insurer—Obligation of Fund to pay—Highway Victims Indemnity Act, R.S.Q. 1964, c. 232, ss. 37, 39 and 40—Civil Code, art. 1959.
Respondent obtained a judgment for $11,534.77 against the estate of a foreign motorist for damages resulting from an automobile accident. Since the judgment was not satisfied, respondent applied to appellant (“the Fund”). The appeal involves only a sum of $1,330.75 which the Fund wants to deduct because it represents medical expenses which respondent could have recovered from her own insurer if she had claimed them. The remedy against the insurer is now prescribed. The Superior Court and the Court of Appeal of Quebec both rejected the Fund’s argument and condemned it to pay the whole sum. Hence the appeal to this Court.
Held: The appeal should be dismissed.
It was admitted that if respondent had claimed the medical expenses from her insurer, she could have recovered the sum of $1,330.75. In these circumstances the insurer would have been subrogated to respondent’s rights and the Fund would not have been obligated to pay her this sum. It must therefore be determined whether the Fund is indebted to respondent for a sum which it would not have had to pay to her if she had submitted her claim to her insurer in time. According to appellant the insurer would benefit from the amount paid by the Fund to respondent, since this insurer would in effect have paid nothing and all remedies against him are prescribed. There is nothing in the Act to justify this argument.
There is an obligation created by the Act, the terms of which are defined in explicit legislation. Respondent’s insurer will not benefit from the payment the Fund was ordered to make. If she recovers the amount, she will
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keep it for herself since it is compensation which is due her.
The real question is therefore whether the claimant may be deprived of the right to recover from the Fund compensation which is due her because she neglected or omitted to recover it from her own insurer when she could have done so. Nothing shows that respondent intended to benefit her insurer. In order to deprive her of her remedy, it is therefore necessary to go further and say that the existence of her right against an insurer was sufficient to deprive her of any possibility of recovering from the Fund the money she was claiming from the third party without applying to her insurer. To accept this proposition would be to place a person who is insured in a less favourable position than a person who is not, since the person who is insured contributes to the Fund. A person who has no insurance has the same rights against the Fund as a person who is insured. By depriving himself of the benefit of his insurance, the latter does not make the situation of the Fund any worse than if he had not taken out any insurance. The Fund is not in the same situation as a surety because this is not a free contract, but an obligation imposed by the Act. Since insurance is not a prerequisite of the remedy against the Fund, the latter must take the situation as it exists at the time the application for satisfaction of the judgment is made to it pursuant to the Act.
Sherwin-Williams Co. of Canada Ltd. v. Boiler Inspection & Insurance Co. of Canada, [1950] S.C.R. 187, affirmed [1951] A.C. 319; The Workmen’s Compensation Board v. Lachance, [1973] S.C.R. 428; Guardian Assurance Co. v. Town of Chicoutimi (1915), 51 S.C.R. 562; Quebec Fire Assurance Co. v. Molson (1851), 1 L.C.R. 222, 7 Moo. P.C. 286; Boucher v. Le Fonds, [1975] C.S. 399; Indemnity Fund v. Marach, [1970] S.C.R. 402, referred to.
APPEAL from a decision of the Court of Appeal of Quebec[1] affirming a judgment of the Superior Court. Appeal dismissed.
J. Tremblay, for the appellant.
P. Unterberg, for the respondent.
The judgment of the Court was delivered by
PIGEON J.—The appeal is against a decision of the Court of Appeal of Quebec, affirming the judgment of the Superior Court condemning appellant (“the Fund”) to pay respondent the sum of $11,534.77 owing on a judgment rendered
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against the estate of a foreign motorist for damages resulting from a collision which occurred on August 12, 1966. The appeal involves only a sum of $1,330.75, which the Fund says must be deducted because it represents medical expenses which respondent could have recovered from her own insurer if she had claimed them.
The obligations of the Fund are defined in ss. 36 to 41 of the Highway Victims Indemnity Act (the “Act”, R.S.Q. 1964, c. 232). The provisions relied on to justify the refusal to pay the sum remaining in dispute are as follows:
37. The creditor shall apply to the Fund by a sworn declaration,…
(b) establishing that no insurer will benefit by the amount claimed;.
39. The application to the Fund transfers to it all the creditor’s rights without restriction …
40. The following persons cannot make application to the Fund:
(a) an insurer to whom a recourse contemplated by section 3, 31 or 36 has been assigned or who is subrogated in such recourse;…
Respondent admitted the existence of the insurance policy which she held at the time of the accident, was entered in the record and contains in section B $2,000 coverage for medical expenses. Respondent also admitted she could have recovered the amount in dispute; para. 18 of her statement of facts reads as follows:
18. THAT under the policy produced as exhibit D-1, Plaintiff might have been able to recover the sum of $1,330.75 for medical fees from her own insurance company under the aforementioned insurance policy.
The trial judge said in answer to the Fund’s submission:
From a practical point of view, it is true that if the plaintiff had claimed from her insurer and had been paid the amount of $1,330.75, the insurer would have been entitled to subrogation and could have taken the necessary action against the said heirs and the estate to collect the amount so paid but if the insurer failed to collect any judgment in its favour the Fund would certainly not have had to compensate the insurer. There was no explanation given as to why the plaintiff did not
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make any claim against her insurer but that did not affect her right to claim against the said heirs and estate. The purpose of the Fund is to compensate victims of automobile accidents to the extent set out in the said Act. The Fund has no greater rights now against the plaintiff than it had as an intervenant in the said action in view of the terms of Article 2468 of the Civil Code except to obtain a subrogation from her of whatever existing rights she may have at the time that she made her claim against the Fund.
It should be pointed out immediately that the issue which arose on the intervention of the Fund in the action brought by Dame Magnan against the heirs of the motorist responsible for the collision in no way touched on the subject matter of the present controversy. The Fund intervened then, as the Act permits, only to discuss liability for the accident and the assessment of damages. Nothing allowed it to raise an argument foreign to the issue in a case where the defendants could in no way invoke plaintiff’s insurance as a ground of defence: Sherwin-Williams Co. of Canada Ltd. v. Boiler Inspection & Insurance Co. of Canada[2].
This does not mean that when, after judgment rendered against the party liable, Dame Magnan made her claim to the Fund, the latter was not entitled to maintain that she was trying to compel it to pay something for which it would not have been liable if she had exercised her rights against her insurer. It is quite true, as Hyde J.A. pointed out in appeal, that there is no question of bad faith or collusion, but is this sufficient to enable the claimant to recover from the Fund what she neglected to collect from her insurer? Is it really necessary, in order to agree with the Fund, to add to the Act something which is not there? If respondent is right, this may mean that every insured motorist has the right to charge the Fund with an obligation incumbent on his own insurer, by allowing his remedy against the latter to lapse and proceeding only against the third party liable, whereas if he exercises his remedy against his insurer, the latter cannot recover anything from the Fund. On the other hand, it is certain that one
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is not obliged to insure oneself. Should the person who has insured himself but who has neglected to exercise his rights against his insurer be in a less favourable situation with respect to the Fund than the person who has not insured himself? These are the questions to be examined.
It should first be noted that respondent was not entitled to recover her medical expenses from her insurer without ceding to him her remedy against the third party liable. Clause 15 of the conditions of the policy contains the following stipulation:
[TRANSLATION] Transfer of Claim.
15. Upon payment of the loss or on assumption of liability by the Insurer therefor, the Insured shall to the extent of such payment made or liability assumed, transfer to the Insurer all rights of recovery against any other party and shall execute all documents properly required by the Insurer to secure to it such rights.
This stipulation shows that this is insurance intended to provide indemnity, not a pure benefit, as was the case for the annuities considered in The Workmen’s Compensation Board v. Lachance[3]. The rule in art. 2584 C.C. should therefore apply in the case at bar. It is clear enough that although the Code laid down this rule only for fire insurance, it is nevertheless applicable to all kinds of insurance providing indemnity for a defined loss. As was pointed out in Guardian Assurance Co. v. Town of Chicoutimi[4], the principle existed as a general rule before the Code, as the Privy Council recognized in Quebec Fire Assurance Co. v. Molson[5].
This means that if respondent had been indemnified for her medical expenses by her insurer, she would have had to account to him for what she might have been able to collect from the third party liable in this respect. Consequently the payment made by the Fund when the third party did not satisfy the judgment would have been to the benefit of the insurer, to the extent that the latter was subrogated to Dame Magnan, even if he had allowed Dame Magnan to institute the proceedings
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alone. There is no doubt that, in these circumstances, the Fund would not have been obliged to pay the judgment creditor the part she herself would have been obliged to pay her insurer. This was the situation in Boucher v. Le Fonds[6], decided by Anthime Bergeron J. on February 27, 1975. There the claimant had collected from his insurer the sum of $1,053 under section B of his policy (medical payments). It was held that for the purpose of the claim against the Fund, this amount was to be deducted from the judgment rendered against the third party liable. This solution seems to me beyond question. But, what of the opinion expressed obiter by Bergeron J., in the following terms on the point which he did not have to decide:
[TRANSLATION] If plaintiff Roger Boucher had omitted to claim this sum of $1,053.00 from his insurer, as he seems to have done at the outset, he would then have circumvented the prescription in 37(b) since an insurer would have benefited from the situation.
As Rinfret J.A. pointed out in the case at bar, all the cases that were cited (this was in 1972) dealt solely with the consequences of the possible remedy against the third party’s insurer, not against the victim’s insurer. As for Marach[7], that case involved an entirely different question, namely the remedy against the Fund for damage caused by an unknown driver. For this reason it is not necessary to consider it exhaustively. All that was there said must be read in the context of the question then before the Court. As in the other cases involving the effect of the possible remedy against the insurer of the party liable, nothing touches on the question in issue in the case at bar, which may be stated as follows: Can it be said that an insurer will “benefit” from the amount claimed, when this insurer has not paid anything and all remedies against him are prescribed?
Neither counsel has cited anything to us which has a direct bearing on the question as I have stated it. It is certain that if we look solely at the words of the Act we must decide against the Fund, and there is a great deal to be said in favour of this view. We are faced not with a contractual or
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delictual obligation, but with an obligation created by the Act, the terms of which are defined in explicit legislation. In the case at bar, Dame Magnan’s insurer will not benefit from the payment the Fund has been ordered to make. If respondent recovers the amount, she will keep it for herself since it is compensation which is due her.
The real question is therefore whether the claimant may be deprived of the right to recover from the Fund compensation which is due her because she neglected or omitted to recover it from her own insurer when she could have done so. Under what principle of law can this sanction be imposed on her? Counsel for the Fund, as his only argument on this crucial point, relied on the axiom that no one may do indirectly what he is forbidden to do directly. His reasoning was essentially as follows: The claimant cannot recover from the Fund for the benefit of her insurer the indemnity which the latter owes her. She has done so indirectly by letting her remedy against her insurer lapse while she was bringing her action against the third party liable. The difficulty with this reasoning is that nothing shows that Dame Magnan intended to benefit her insurer. We know only that she did not make any claim against him within the prescribed time. We must therefore consider the situation without ignoring the possibility that it was simply through inadvertence or oversight that she allowed prescription to occur. In order to deprive her of her remedy, it is therefore necessary to go further and say that the existence of her right against an insurer was sufficient to deprive her of any possibility of recovering from the Fund the money she was claiming from the third party without applying to her insurer. The difficulty with this proposition is that it has the effect of placing a person who is insured in a less favourable position than a person who is not, since the person who is insured contributes to the Fund by means of the assessment which his insurer is obliged to bear on the premium he pays him, whereas the person who is not insured pays absolutely nothing.
Another possible objection to Dame Magnan’s claim against the Fund comes from the transfer of rights necessarily involved in any application to
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satisfy a judgment made under the above-mentioned sections of the Act. Obviously this transfer is aimed first at the obligation of the liable third party—this is why the Fund will deduct from the judgment the value of everything the creditor may have received. It is nevertheless certain that the transfer of “all the creditor’s rights without restriction” is not limited to the rights against the judgment debtor. There is no reason why the Fund would not also be entitled to the transfer of the creditor’s rights against his own insurer as well as against the insurer of the third party liable. There is no doubt that if the creditor has received any money from one or the other, he must give the Fund credit for it. The difficult question is whether he must in the same way suffer the deduction of the right he has allowed to become extinct by prescription.
Article 1959 C.C. provides with respect to the person who benefits from a suretyship:
1959. The suretyship is at an end when by the act of the creditor the surety can no longer be subrogated in the rights, hypothecs and privileges of such creditor.
I think that it may be conceded that the “act of the creditor” means not only a positive act but also any omission or negligence (Traité de droit civil du Québec, vol. 13, by Hervé Roch and Rodolphe Paré, at p. 677). However, the Fund’s obligation is not a suretyship but an obligation imposed by the Act. Accordingly, I find it very difficult to apply to it a rule which the Legislature did not see fit to spell out. In short, I do not think the intention to impose this requirement is sufficiently certain to induce me to deprive a claimant of his remedy against the Fund because he neglected to exercise fully his rights against his own insurer.
As I have already mentioned, a person who has no insurance has the same rights against the Fund as a person who is insured. By depriving himself of the benefit of his insurance, therefore, the latter does not make the situation of the Fund any worse than if he had not taken out any insurance. The Fund, which is obliged to protect those who are not insured in the same manner as those who are,
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cannot be likened to a surety, who contracts freely with respect to a situation about which he is entitled to make enquiries before binding himself. Moreover, if a claimant could be deprived of his remedy against the Fund because he allows his rights against his insurer to lapse, should not, in logic, the same solution apply if he has lost his rights through a breach of his contract, or even if the latter is voidable, but surely not if it is void ab initio? All the distinctions which would have to be made, and the inequitable consequences which would result, lead me to conclude that the only fair solution is to say that since insurance is not a prerequisite of the remedy against the Fund, the latter must take the situation as it exists at the time the application for satisfaction of the judgment is made to it pursuant to the Act.
For these reasons, I conclude that the appeal should be dismissed with costs.
Appeal dismissed with costs.
Solicitors for the appellant: Gilbert, Magnan & Marcotte, Montreal.
Solicitors for the respondent: Unterberg & Boyer, Montreal.