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THE INSURANCE CONTRACTS - Formation of the contract - Misrepresentation

Wednesday, June 05, 2019 @ 8:34 AM  


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Appeal by the plaintiff from summary judgment dismissing his action. The appellant was catastrophically injured in a motor vehicle accident when struck by K. K was insured by the respondent. The respondent rescinded the insurance contract prior to the accident for misrepresentation by K of his wife’s driving record. In the present action, the appellant alleged that the insurance contract was not properly terminated by the respondent and K was in fact insured by the respondent on the date of the accident. The motion judge found that the respondent was entitled to rescind the insurance contract based on material misrepresentation, making it void ab initio, that it had done so effectively, and that, as a result, s. 258(1) of the Insurance Act was not available to the appellant to sue the respondent as there was no contract with the respondent that provided indemnity to the at-fault driver or owner at the time of the accident.

HELD: Appeal allowed. The motion judge’s conclusion that the insurance contract had been rescinded was inconsistent with the statutory scheme created by the Compulsory Automobile Insurance Act and the Insurance Act. The termination and renewal provisions of the Insurance Act and regulations provided notice periods to allow an insured time and opportunity to obtain alternate coverage when they received notice that their insurance was going to be terminated or not renewed. The scheme of the automobile insurance provisions of the Act made it clear that an insurer could not effectively rescind a contract at common law, making it void ab initio. The insurer must comply with the Act. Under s. 233, a misrepresentation did not render the contract void. It was neither terminated nor rescinded as void ab initio. The contract remained in effect, but the insured’s rights were limited to certain statutory accident benefits. The respondent did not terminate the contract in accordance with the provisions of the Act and the regulations as it did not give 15 days’ notice of termination. Because the contract was not terminated in accordance with the Regulation, the respondent’s attempt to rescind was not effective, and the contract remained in force. The Act required strict compliance and provided an orderly and predictable set of consequences for compliance and non-compliance. Allowing an insurer to rescind at common law for misrepresentation would undermine the policy of the legislature to provide certain statutory accident benefits to every person who obtained a policy of insurance, including by misrepresentation, and to provide protection to innocent third parties. The respondent did not establish on the record that K knowingly misrepresented facts in the application or acted as the agent of his wife and had thus not established a defence under s. 258(11) of the Act. It was accordingly liable for the full amount of the policy limits.

Merino v. ING Insurance Co. of Canada, [2019] O.J. No. 2128, Ontario Court of Appeal, K.N. Feldman, S.E. Pepall and G.I. Pardu JJ.A., April 25, 2019. Digest No. TLD-June32019009