Article by Amanda Lopez
In personal injury cases, the primary goal of the Plaintiff’s lawyer is to restore the Plaintiff, as much as possible, to their pre-accident condition so far as the losses suffered can be repaired by a monetary award. Obviously, in cases of serious and permanent injury, no amount of money can truly make up for the harm that has been suffered – but it serves as the next best option.
Since auto insurance is mandatory in Ontario, any judgment awarded against a Defendant following an accident is typically paid by the Defendant’s insurance company rather than the Defendant personally. However, in certain situations, an insurance company may allege that, despite the Defendant having an insurance policy in place, they are not required to defend and indemnify their insured. This is referred to as “taking an off-coverage position”.
An insurance company may deny coverage to their insured and take this position for various reasons, such as lack of cooperation from their insured, a breach of statutory conditions, or material misrepresentation or fraud.
In practice, even when coverage is denied, the insurance company will still participate in the litigation as a “Statutory Third Party”. The effect of this means their contribution to any award made by the Court against the Defendant is capped to the minimum liability limit of $200,000. While $200,000 is still a considerable amount of money, it represents a significant reduction from the typical coverage limit of $2,000,000.
What does this mean for a Plaintiff?
When an insurance company takes an off-coverage position, the Plaintiff and their lawyer are often provided with minimal to no information regarding the basis for this decision. Since the denial of coverage to the Defendant can significantly affect the Plaintiff’s ability to recover adequate compensation, this is clearly not an ideal situation.
The good news is that insurance companies cannot simply deny coverage to their insured and add themselves as a statutory third party without providing the Plaintiff with the reason for the denial. In cases where the Plaintiff has additionally pursued its case against the Plaintiff’s underinsured motorist insurer (OPCF44R), the Plaintiff is further entitled to the details of the investigation underlying the denial (see: Jones et al. v Manzon et al., 2024 ONSC 1205).
Takeaway
While a Plaintiff may be affected by an insurer’s decision to add itself as a statutory third party, case law makes it clear that a Defendant’s insurer is required to provide the Plaintiff with an explanation for their position. If you have a question regarding an insurance company taking an off-coverage position, get in touch with Reybroek Law.
