Section 132 of the Insurance Act permits a plaintiff to commence a direct action against an insurer when an insured is liable for injury or damage and fails to satisfy a judgment, except in relation to motor vehicle liability policies. The plaintiff is subject to the same equities as the insurer would have if the judgment had been satisfied.
This provision was considered in SVIA v. Northbridge, 2019 ONSC 7459. Northbridge’s insured, 1390348 Ontario Ltd. (“139 Ltd.”), was retained to supply and install a sewer system in a subdivision.
In 2008, the owner and developer of the subdivision, SVIA Homes Limited (“SVIA”), sued 139 Ltd. and others because the sewers were not working properly.
In 2018, default judgment of just over $1.8 million was ordered against 139 Ltd. and another defendant. SVIA was unsuccessful in enforcing the judgment against 139 Ltd.
SVIA then brought an application against Northbridge pursuant to section 132 of the Insurance Act. Northbridge argued that coverage was forfeited because 139 Ltd. breached a policy condition to provide prompt notice of the claim. Northbridge was first notified of the claim in April 2017.
Justice Chalmers agreed with the position of Northbridge. His Honour indicated that SVIA is subject to the same terms and conditions in the insurance policy as 139 Ltd.
SVIA had to establish that the damages awarded in the judgment were covered by the policy. If the damages were covered, the onus would shift to Northbridge to establish that an exclusion applied. Northbridge also had the onus of establishing that coverage was forfeited as a result of a breach of condition.
Northbridge provided uncontradicted evidence that it was unable to conduct proper investigations due to the late notice of the claim. Justice Chalmers was satisfied that 139 Ltd. was in breach of the policy. Moreover, Justice Chalmers declined the request by SVIA to grant relief from forfeiture.
As a result, Northbridge was successful in the application and is not required to pay any damages to the plaintiff.