In this Ontario Superior Court action (Gallagher v. Todish et al, 2023 ONSC), an automobile insurance claim was dismissed as it was determined that the insurance company had indeed provided a valid cancellation notice prior to the accident.
The decision underscores that it is not only the actions of an insurance company that are crucial to the analysis of whether a notice of cancellation is deficient, but rather that the actions taken by an insured will also carry significant weight.
The Court affirms that an insured’s understanding that a termination of the policy is imminent, and thereby confirming this understanding by taking active steps to rectify any arrears, will have an effect on any further arguments brought forth by the insured that a subsequent notice of termination was deficient.
In brief, the insurance company provided the insured, Todish, with a notice of cancellation of her automobile insurance for non-payment of her premiums. Todish took steps to pay the amount owing and properly maintained her insurance for the next few months.
However, Todish received yet another notice of cancellation for non-payment of premiums a few months later, the wording of which was identical to the initial notice. Notably, the cancellation date listed in the notice was October 13, 2014.
On November 25, 2014, the insured was involved in a motor vehicle accident with the Plaintiff, who then commenced a claim against Todish and her own insurance company. The Plaintiff’s insurer brought a Third-Party claim seeking recovery from the insurer for Todish, which then brought a motion for summary judgement dismissing the third-party claim.
In response the Plaintiff’s insurance company initiated a cross-motion for summary judgement in which it sought a declaration that Todish’s policy was effective at the time of the subject accident.
The Notice of Cancellation
The Court affirmed that the right of an automobile insurance company to terminate a contract is severely restricted and that the statutory conditions must be strictly complied with, as provided under condition 11 of O. Reg. 777/93 of the Insurance Act.
Consequently, any failure to comply with the statutory conditions will result in the insurance company being bound by the policy despite termination.
The Plaintiff’s insurance company argued that the cancellation notice was deficient, and as such, the policy remained valid at the time of the accident. Therefore, the Plaintiff’s insurance company would be entitled to contribution and indemnity from Todish’s insurance company.
The Court noted that Todish had received the same cancellation notice in the past, and she had made payments on the policy to bring her account into good standing. Therefore, it follows that she understood that the notice would terminate her policy.
However, the insurance company’s cancellation notice included the words “guaranteed funds” in lieu of specifying the three payment options: cash, money order, or certified cheque.
Despite tribunal decisions finding terminations to be invalid due to same, the Court was ultimately persuaded that the notice of cancellation was not deficit as the term “guaranteed funds” encompasses all three payment methods and was therefore sufficient to advise an insured how to pay.
The Court further held that the insurance company’s choice not to provide an address for the insured to pay did not render the notice deficient. It was noted that the Todish had received the same notice a few months prior and therefore understood the actions required to prevent cancellation of the policy.
The notice of cancellation at issue set out the following criteria to retain insurance:
- The date by which action must be taken; and
- The contact information of the agency to assist the insured with doing so.
Therefore, Todish’s insurance company had conveyed the necessary information to her and the notice was sufficient to avoid any findings of unfair treatment.
Ultimately, the Court held that the Todish’s policy was not in effect at the time of the accident.
Insurance companies should be cautious to include all relevant and required information in a notice of cancellation in order to properly terminate a contract of insurance.
The Court has affirmed that an automobile insurance company has a severely restricted right to terminate a contract of insurance, and that any deviations from the statutory conditions will likely result in a notice being found deficient.
However, in circumstances whereby an insured has properly received a notice of cancellation more than once and has previously taken steps to bring the account into good standing, the Court may find that the insured was aware that the action must be taken to avoid cancellation of the insurance policy.
Insureds will likely not be able to rely on the position that the most recent notice of termination was deficient if they have previously taken the appropriate steps on prior notices, and/or demonstrated their understanding of the process to do so.