Law Times

Law Times • august 24, 2015 Page 7 www.lawtimesnews.com COMMENT analysis of uber's insurance implications reveals serious issues By Chella turnBull For Law Times ber, the San Francisco-based ride-book- ing smartphone application, has been in both the news and the courts lately. An analysis of the insurance implications re- veals serious issues. The application matches a user to a driver. No cash changes hands as the application charges the user's credit card. Uber takes 20 per cent with the driver taking the rest. To be a driver, you need a licence, a vehicle, and proof of insurance. You sign a contract with a Dutch company and get an iPhone with the ap- plication. GPS tracks your location and notifies you of nearby users. The founders of Uber, a company said to be worth billions of dollars, are two Americans in Paris who had trouble hailing a cab. The company is not with- out controversy as it brings in surge pricing during high usage. Taxi drivers complain that Uber competes unfairly, and cities in Brazil, India, and Europe have banned it. The service raises several legal and insurance is- sues. In May 2015, the Ontario Superior Court heard an injunction application against Uber brought by the City of Toronto. The court denied the injunction, holding that bylaws do not apply to a technical plat- form: "While the city made much of its 'walk like a duck' metaphor, the simple fact of the matter is that it does not require ducks to be licensed." Taxi and limousine drivers, meanwhile, have filed a $400-million class action lawsuit against the UberX service and its drivers. And on July 14, Toronto Police laid charges against 36 Uber drivers for offences con- trary to the Highway Traffic Act. Uber states: "Every ride on the UberX platform in Canada is backed by US$5 million of contingent auto liability insurance covering bodily injury and property damage . . . ridesharing partners are well covered in addition to any insurance coverage main- tained by the driver." In City of Toronto v. Uber Canada Inc., Uber sought an interim order sealing its insurance policy pursu- ant to the Courts of Justice Act. An affidavit sworn by Henry Fulder, insurance director for Uber, stated: "Even within the companies, the policy is shared only on a tightly restricted, need-to-know basis . . . dis- closure would cause serious harm." The affidavit de- scribed an "extensive history of negotiations" leading to a policy that is "not a typical 'off the shelf ' product." The court rejected Uber's application. The terms of Uber's insurance policy, therefore, are unclear, some- thing that creates a legal quagmire should one of its drivers be in an accident. The standard Ontario auto insurance policy is clear. As per the general exclusion under s. 1.8.1, except for certain accident benefits coverage, there is no coverage if the automobile is used to carry paying passengers. In the case of an existing policy where someone starts driving for Uber, the statutory condition in s. 8 applies: "The insured shall promptly notify the insurer or its agent in writing of any change in the risk materi- al to the contract and within the insured's knowledge." Failure to notify the insurer would likely void cov- erage. A New Brunswick case (Goodwin v. CGU Insur- ance Co. of Canada) relieved the insurer from coverage when a cab driver used his personal vehicle to pick up a fare and got into an accident. "Where there has been a violation of a clearly worded exclusion to an automo- bile insurance policy, there is no coverage available to the insured or to any innocent third party irrespective of the circumstances," the court wrote. In Ontario, if an insurer had to hon- our a claim pursuant to the absolute li- ability provisions in s. 258 of the Insurance Act, it could seek repayment from the Uber driver personally. The standard owner's policy states: "We may, on occasion, be required by law to make payments, even though we are not otherwise li- able for them under this policy. If so, you or other in- sured persons will have to reimburse us upon demand for those payments." In Winch v. Kedgh, the defendant drove a loaded cube van and caused an accident. The policy specifical- ly excluded driving a vehicle weighing more than 4,500 kilograms. The Court of Appeal held that his actions "removed a condition precedent to the insuring agree- ment" and there was "no possibility of indemnity." It is, therefore, unlikely that absolute liability would apply to Uber driving given Goodwin. Plaintiffs may claim against their own uninsured coverage or the motor vehicle accident claims fund, but with serious injuries, the $200,000 limits may leave the Uber driver personally on the hook for any shortfall. The implications, then, are quite serious unless Uber's policy covers the gaps. Under what circum- stances would Uber's carrier refuse coverage? And if a negligent driver victimizes someone driving for Uber, would the carrier consider the driver to be uninsured? In that case, the driver would be unable to sue the neg- ligent driver due to s. 267.6 of the Insurance Act unless he or she could prove coverage through Uber. These important questions require answers. Taxi and limousine drivers must accept that com- petition isn't going away. Hopefully, the relevant in- dustries and our laws will respond in a timely and use- ful fashion to this new challenge. LT uChella Turnbull, a lawyer practising personal injury liti- gation at Zuber & Co. LLP, is available at 416-646-3129 or cturnbull@zubco.com. u SPEAKER'S CORNER deductions of disability payments in wrongful dismissals clarified ne vexing question that has been the subject of further ju- dicial scrutiny is whether to allow the payment of disability income to wrongfully dismissed employ- ees at the same time that they're receiving their full salary for the reasonable notice period. In a recent decision, Fernandes v. Peel Educational, Superior Court Justice Gor- don Lemon determined that in cases where the employer, and not an insurer, is respon- sible for paying the disability benefits, the dismissed employee couldn't receive both the disability and employment incomes at the same time despite paying the insur- ance premiums. Having been unable to infer the parties' contractual intention for concurrent payments, Lemon concluded that the disability payments should begin immediately after the employee's wrongful dismissal payments end. Remy Fernandes was a well-regarded teacher at a private school, Peel Educa- tional & Tutorial Services Ltd. After 10 years and three months, the employer terminated his employment for just cause for falsifying students' marks and lying about how he had calculated them. After a 10-day trial, Lemon found the employer had wrongfully dismissed Fernandes and awarded him 12 months' salary in lieu of notice. The court accepted that the school had knowingly sent out the false interim marks to the students and parents with- out commenting on their accuracy, some- thing that in its view diluted the serious- ness of Fernandes' conduct. In addition to the wrongful dismissal damages, Lemon found the school liable for the value of the long-term benefits that Fernandes had lost. Following his dismissal, Fernandes became disabled during the period of reasonable notice. Having dismissed him for cause, the school immediately discon- tinued his benefits coverage. Based on expert evidence, Lemon accepted that had Fer- nandes applied for the long- term benefits, he would have qualified for them. In his reasons for judgment, Lemon thoughtfully invited the parties to make written submissions on the issue of determination or resolution of the dis- ability benefits claims. In his submissions, Fernandes argued the court shouldn't set off his disability benefits against the wrongful dismissal damages because he had paid the premiums. The basis for Fernandes' argument finds support in the Ontario Court of Appeal jurisprudence that stands for the proposition that absent an express provision in the employment contract precluding double recovery, it's reasonable to assume that an employee wouldn't willingly negotiate and pay for a benefit that would allow an employer to avoid responsibility for a wrongful act. In its turn, the school successfully ar- gued that the disability payment should be payable on the termination of the 12 months' salary for wrongful dismissal and not before. To allow the disability payments at the same time as Fernandes received his full salary for the notice pe- riod would amount to double recovery going over and above the objective of making him financially whole for his losses. Relying on the Supreme Court of Canada's decision in Sylvester v. British Columbia, in which the court deducted disability payments from the wrongful dismissal damages, the school argued it's fundamentally inequitable to award double payment against a single defendant. The school rationalized that allowing the double payment would put Fernandes in a bet- ter position than he would have been in had the wrongful dismissal not occurred. Argu- ably, to compel an employer to do so would require a specific contractual provision in the employment contract. In this regard, Lemon found Fernandes' employment contract spoke directly against such an intention. In many ways, it's difficult to reconcile the Ontario Court of Appeal cases with Sylvester because they turn on their unique facts. The authorities that permit the dis- missed employee to receive both the dis- ability and employment incomes differ on the basis that they involve a third-party insurer and, unlike in Fernandes, the em- ployer was seeking to take advantage of payments made by the insurer to reduce the wrongful dismissal damages. In the present case, the significant fact was there was no third-party insurer pay- ing the benefits. Barring the deduction, the school would have to pay both the dis- ability and the employment income. Hav- ing found no contractual evidence that the parties intended the school to pay both incomes concurrently, Lemon ordered the school to make the disability payments immediately after the wrongful dismissal amounts ended. In the court's view, that would put Fernandes in the position he would have been in had the employer not breached the employment contract. Consequently, where the employment and disability incomes are coming direct- ly from a single source, this factor, absent a contractual term to the contrary, would bar the concurrent payments despite the fact the employee had paid for the insur- ance premiums. It would also automati- cally distinguish such a case from others that held that the receipt of the disability payments from an insurer wouldn't re- duce the employer's liability for wrongful dismissal payments. Fernandes serves as a good reminder to employers that whenever they hastily ter- minate the dismissed employee's disability coverage, they're running the risk of step- ping into the shoes of the insurer should the employee become disabled during the reasonable notice period. In the present case, the school was rath- er fortunate that at the time of his dismiss- al, Fernandes was 62 year old and, as such, wouldn't receive the disability benefits for a long period. Had he been 40, the school could have been liable for 25 years and mil- lions of dollars in damages. Just cause is an assertion that's easy to make but often difficult to substantiate. Employers that jump to the conclusion that they have cause do so at their own eco- nomic peril. LT uNikolay Chsherbinin is an employment lawyer at Chsherbinin Litigation and author of The Law of Inducement in Canadian Employment Law published by Carswell, a Thomson Reuters Business. He's available at 416-907-2587, nc@nclaw.ca or nclaw.ca. Articling student Horia Soltani provided as- sistance with this article. Labour Pains Nikolay Chsherbinin O U

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