Insurance Company Discovers It Must Notify More Than Just The Policy Holder When Cancelling Insurance
When cancelling an insurance policy, it’s common for insurers to send registered mail to the person named on the policy. However, in a case recently heard by the Court of Appeal for Ontario, communicating solely with the policy holder might not be enough to properly terminate a policy.
A policy is terminated, an accident occurs
The policy holder was the wife of the driver/owner of a vehicle that was involved in a serious motor vehicle accident. Prior to the accident the insurer had sent the policy holder registered mail indicating her policy was being cancelled due to non-payment of premiums. However, the insurer did not realize the owner of one of the cars on the policy was the policy holder’s husband. He received no letter indicating the policy was being cancelled.
One of the passengers involved in the accident sued the driver for damages. Having already cancelled the policy, the insurer was not involved in the lawsuit. The driver settled the action for $234,574.33 and the province’s Motor Vehicle Accident Claims Fund was assigned to collect the damages from the driver. The Fund also sued the insurer claiming the insurer had not effectively terminated its policy, and as such, it remained in force at the time of the accident.
Trial judge finds policy could not have been terminated
At the initial trial, the province’s Superior Court ruled the insurer did not properly terminate the policy. The court found that the Insurance Act required notice of termination to be sent to “the insured.” The insured in this case, included the owner of the vehicle. By sending notice only to the policy holder, the insurer did not effectively terminate the policy. As a result, it was in force at the date of the accident.
The insurer appealed, in part, on the grounds that the trial judge erred in finding the notice of termination was ineffective. They claimed the policy owner misrepresented herself as the owner of the vehicle and they simply relied on that misrepresentation. However, the trial judge found no evidence the policy holder had made a misrepresentation of that kind, and that nobody had asked her who the owner of the vehicle was when adding it to her policy.
The first issue the court looked at was whether the policy holder misrepresented the ownership of the car, and if so, if the insurer was entitled to rely on that misrepresentation. The court referenced Subsection 233(3) of the Insurance Act, which states
No statement of the applicant shall be used in defence of a claim under the contract unless it is contained in the signed written application therefor or, where no signed written application is made, in the purported application, or part thereof, that is embodied in, endorsed upon or attached to the policy.
The court found there was no written misrepresentation made, in writing or orally, by the policy holder. Without a finding of misrepresentation, the insurer had no basis for appeal on these grounds.
The court then turned to the insurer’s submission that it was entitled to cancel the policy by sending notice only to the policy holder as the “named insured.” The insurer relied on Section 236 of the Insurance Act, which states an insurance company can give notice that it does not intend to renew insurance to the “named insured” with 30 days’ notice. However, the court pointed out that in this case the insurer was seeking to cancel an existing policy as opposed to not renewing a policy.
The court upheld the trial judge’s finding that the policy was valid at the time of the accident and it covered the driver as the owner of the insured vehicle.
You may find yourself approached by representatives of an insurance company following an accident. It is important not to settle with an insurance company without first talking to a lawyer in order to ensure you do not miss out on your rights to compensation. At Derfel Injury Law, we have years of experience representing people injured in motor vehicle accidents. We work tirelessly to get the best possible resolution and compensation for our clients. Contact us by phone at 416.847.3580 or reach us online to talk today.