Municipality not liable for failing to enforce its bylaw regarding insurance limits for taxis

4 minute read
25 July 2016

The Ontario Court of Appeal has ruled that a municipality that failed to enforce a bylaw requiring taxis to carry at least $1,000,000 of insurance is not liable for losses suffered in a vehicle accident with an underinsured taxi.

In the case of Vlanich v. Typhair, 2016 ONCA 517, Sheileena Mallette and Kaitland Vlanich were hurt when their car collided with a taxi in North Grenville, a small municipality in south-eastern Ontario. Contrary to North Grenville's bylaw, Aces Taxi was carrying only $200,000 in third-party liability insurance.

State Farm's policy on the Mallette car provided coverage if an at-fault motorist was uninsured or underinsured. Accordingly, State Farm claimed against the municipality, alleging that North Grenville negligently failed to enforce its bylaw and ensure that Aces Taxi had the required insurance coverage.

At the time Aces Taxi applied for and obtained its taxi licence in 2005, it gave bylaw enforcement officers documentary proof that it carried the required $1,000,000 liability insurance. However, that coverage was cancelled the following year for non-payment of premiums. The municipality was notified of this cancellation.

On its renewal application in 2008, Aces Taxi submitted a pink slip from the insurer and signed off on a declaration stating the following:

I, the undersigned, attest and certify the truth of all statements or representations contained herein. I further attest that I have not withheld any information pertinent to this application, and if licensed by the Township of North Grenville, agree to abide by the provisions of all applicable bylaws.

With respect to the approvals already on file with the Township, I hereby declare that there have been no significant changes which would affect my viability to hold a Municipal licence.

The pink slip given to and accepted by the bylaw enforcement officer did not specify the amount of coverage the taxi held. Aces Taxi was granted a license despite having only one-fifth of the required liability insurance.

The bylaw enforcement officer testified that on the basis of the pink slips and the signed declaration, and in light of his personal relationship with the owner, he believed that Aces Taxi had the required $1,000,000 of coverage. While the trial judge recognized that there were shortcomings in the municipality's approach, he did not consider these shortcomings to be unreasonable or in bad faith.

The Court of Appeal considered whether the municipality owed a private law duty of care to the injured party. The municipality acknowledged that failing to enforce the bylaw's $1,000,000 insurance requirement resulted in reasonably foreseeable harm. However, the Court held that foreseeability alone was not enough, and that to establish a private law duty of care, a sufficient nexus or connection must exist between the alleged negligence of the public authority and the losses suffered by the injured party. That nexus was missing here.

In enacting the bylaw, the municipality had a general public duty to enforce a licensing scheme for the benefit of the public as a whole. The court held, however, that this general public duty is not equivalent to a private law duty of care. Without "something more", licencing a third party does not create a "close and direct" relationship capable of giving rise to a duty of care between a public authority and an individual member of the public who may interact with a licensee. As a result, the municipality was not liable for the losses.

This decision by the Court of Appeal should bring comfort to municipalities, as it illustrates that courts will apply reasonable limits to the circumstances in which a municipality will be found to owe a private law duty of care in the enforcement of municipal bylaws.

Mark Charron and Stephanie Doucet from Gowling WLG's Ottawa Insurance Defence Group were the successful counsel for the municipality in this case, both at the trial and appellate level.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.