Opinion ID: 2169158
Heading Depth: 2
Heading Rank: 3

Heading: Analysis of the PAU

Text: The PAU has an introductory paragraph and then has four undertakings labeled A, B, C and D. A review of the entire document shows that the PAU contemplates an action in a Canadian court. The introductory paragraph requires the ACIA to appoint an official to receive service of process on its behalf, and requires it to promise to appear in a Canadian court in any claim filed there. Clearly this paragraph envisions a Canadian lawsuit. In the first undertaking, the ACIA agrees to appear in any action against it or its insured in any province or territory in which such an action has been instituted. This paragraph also contemplates a lawsuit in Canada. In the second undertaking the ACIA agrees to cause notice or process to be served upon the insured upon receipt from any of the Canadian superintendents of insurance and Canadian registers of motor vehicles mentioned in the introductory paragraph of the PAU. Once again, this paragraph contemplates a Canadian lawsuit. In the third undertaking, the ACIA agrees [n]ot ... set up any defence to any claim, action, or proceeding, under a motor-vehicle liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the law relating to the motor-vehicle liability insurance contracts of the Province or Territory of Canada in which such action or proceedings may be instituted, and to satisfy any final judgment rendered against it or its insured by a Court in such Province or Territory, in the claim, action, or proceeding, up to.... [Emphasis added.] The dissent focuses on the word may in this paragraph and argues that may implies permission, and thus that the ACIA has waived certain defenses in cases that may have been brought in a Canadian court. We cannot agree. Such an interpretation ignores the impetus of the whole of the PAU contrary to the well-established principle that contracts are to be construed in their entirety. [10] We believe the use of the word may in context reflects the disjunctive nature of the previous phrase in the PAU. Hence use of may in this context implies that the PAU applies in whatever province or territory the suit is brought, not that the ACIA waives defenses in any forum in which suit could be brought. This is consistent with the last portion of the cited language wherein the ACIA promises to satisfy any judgment issued by a Canadian court on the claim. This language certainly suggests a Canadian lawsuit. The fourth undertaking relates to insurance cards and does not shed light on the issue at hand. After review of the entire PAU, we are satisfied that the ACIA's additional obligations only apply when a lawsuit is filed in Canada. As to Lozanis, we find that the Court of Appeals reached the right result, but that it did not properly analyze the PAU. We believe the right result was reached because Lozanis did institute a lawsuit in Canada making the PAU applicable. The Canadian lawsuit was, however, enjoined at the ACIA's request and the matter was resolved in a state court. Thus, the state court lawsuit, was a substitute for the Canadian lawsuit and the PAU did apply. Indeed, any other resolution would have allowed the ACIA to avoid its obligations under the PAU. However, we disagree with the Lozanis Court to the extent that it suggested that the forum of the lawsuit did not affect whether the PAU applied. Finally, we note that Canadian courts also understand PAUs to apply on the basis of where an action is litigated. In Potts v. Gluckstein, 8 OR3d 556, 558 (Ont Ct App, 1992), [11] a plaintiff from British Columbia was injured by an Ontario defendant and brought suit in Ontario. The Ontario court, discussing the reciprocal insurance scheme, which is based upon a Power of Attorney and Undertaking, stated: In the event of an accident, the insurer agrees to be bound by the law of the province or territory where the action is brought and not the province where the policy is issued. The insurer also accepts liability to the limits prescribed in its policy or, at least, to the minimum limits established in the province or territory where the action is brought. [Emphasis added.] Later in its opinion, the court noted its earlier decision in MacDonald v. Proctor, 19 OR2d 745 (Ont. Ct. App., 1977), in which it stated that the effect of the PAU was to commit the insurer to ... observe Ontario rules to a certain extent, where its insured is involved in Ontario proceedings, [but that the PAU did not convert] the Manitoba policy [involved in MacDonald] [into] one that is made in Ontario. [Emphasis added.] The Ontario courts have turned to this formulation repeatedly. [12] Similarly, courts in other provinces have suggested that by issuing a PAU, the insurer agrees to be bound by the laws of the forum, not any possible forum. For example, in Court v. Alberta Motor Ass'n Ins. Co., 47 ACWS3d 610 (B.C.Sup.Ct., 1994), an Alberta plaintiff sued an Alberta defendant in a British Columbia court for an accident that occurred in British Columbia. The court applied British Columbia law, stating: [I]n any action in British Columbia against [the insurer] arising out of an automobile accident in British Columbia, [the insurer] is precluded from setting up any defence to the claim, including a defence to the limit of liability, that might not be set up if the policy were one issued in British Columbia. The British Columbia court required that the action be in British Columbia for that province's law to apply. Also instructive is the British Columbia Court of Appeal's decision in Marchand v. Alberta Motor Ass'n Ins. Co., 47 ACWS3d 714 (B.C.Ct.App., 1994). There, two parties from Alberta had an accident in British Columbia. An insurance company challenged the British Columbia action, saying the plaintiff only chose that forum because the defendant insurer executed a PAU with the British Columbia government. By suing in British Columbia, then, the plaintiff could take advantage of liability minimums higher than those in both parties' home jurisdiction of Alberta. Ultimately, the court allowed the action because the accident occurred in British Columbia, but the defendant's argument, which the court acknowledged, rests on the fact that had the suit been brought in Alberta, the provisions of the PAU would have been ineffective despite that the accident occurred in British Columbia. That is because the PAU only requires insurers not to raise defenses that would not be allowed under the law where the suit is brought. [13]