Sometimes A Cancellation Isn’t A Cancellation At All

While most drivers of cars have insurance, there are a high number of instances where accidents happen where an at-fault-party has no insurance, insufficient insurance, or are underinsured. When people are injured at the hands of an uninsured driver, there are concerns about who will be responsible to pay for treatment and damages. But sometimes it’s not so clear whether an uninsured driver really is uninsured. Such was the case in a recent decision issued by the Court of Appeal for Ontario.

The accident

The plaintiff was catastrophically injured when crossing a street when she was struck by a car driven by the a man (“TK”) whose wife (“SA”) was a passenger. Three months prior to the accident they had applied for automobile insurance. After initially being issues a one-year policy, it was rescinded after about a month when the insurer determined the couple had misrepresented themselves on the application.

The plaintiff sued TK and SA and obtained a judgment of $2,000,000 on July 28, 2011. Once she discovered TK was not insured, she also sued her mother’s insurance provider, obtaining an award of $18,893. She also received $181,107 from Quebec’s Société de l’assurance automobile du Québec. TK’s insurer (“the insurer”) had maintained they had rescinded the policy before the accident. However, the plaintiff commenced an action arguing that TK’s insurance policy had not been properly terminated. The motion judge dismissed this application on summary judgment, finding “the respondent insurer was entitled to rescind the insurance contract based on material misrepresentation, making it void ab initio (meaning from the beginning); that it had done so effectively; and that, as a result, s. 258(1) was not available to the appellants, as there was no contract with the respondent that provided indemnity to the at-fault driver or owner at the time of the accident.”

The appeal

The court of appeal disagreed, finding that “ If an insurer were permitted to rescind an insurance contract at common law ab initio, a person who believed they were operating a vehicle with insurance could have that contract rescinded with retroactive effect, putting the person in automatic contravention of the Compulsory Automobile Insurance Act, a result which is clearly inconsistent with the intent of the legislature.”

The court added,

“The termination and renewal provisions of the Act and regulations provide notice periods to allow an insured time and opportunity to obtain alternate coverage when they receive notice that their insurance is going to be terminated or not renewed. There are also restrictions on when an insurer may refuse to renew: Compulsory Automobile Insurance Act, s. 12(1); O. Reg. 777/93, ss. 11(1.1), (1.2); Insurance Act, ss. 236(1), (2). The purpose of these requirements is to ensure that a person who drives a car always knows whether they are insured, so that they can take steps to bridge any gap in their coverage, both for their own benefit and for the benefit of other drivers. If they are not able to secure alternate coverage, they must not drive the vehicle or allow it to be driven.”

The letter provided to TK and SA should have provided them with 15 days’ notice of termination. As a result, the court found the contract to be in effect on the date of the accident.

At Derfel Injury Law we have over a decade of experience representing clients who have been injured in motor vehicle accidents in Ontario. We have the expertise, compassion, and creativity required to look after your car accident claim from beginning to end, and can help you bring a claim against your insurance company as though it’s the third party when an unidentified, underinsured or uninsured motorist is at-fault. Please reach us at