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Costly Improper Cancellation of Auto Policy

The court’s decision in Allstate Insurance Company v. Her Majesty the Queen, 2020 ONSC 830, shows that automobile insurers must comply with statutory requirements when cancelling policies, or else there can be costly consequences.

In May 2014, Allstate sent the claimant a notice by registered mail that his policy would be cancelled on June 14, 2014 if he did not pay outstanding premiums. The outstanding premiums were not paid.

The claimant was involved in a serious accident in October 2014 and was rendered a quadriplegic.

Allstate took the position that it was not responsible to pay statutory accident benefits because the policy was cancelled prior to the accident.

Justice Davies disagreed. Her Honour upheld the decision of an arbitrator that the policy was not properly cancelled. Specifically, the notice of termination did not provide an address where payment could have been delivered to avoid termination of the policy.

Therefore, the policy remained in effect at the time of the accident, and Allstate is responsible to pay benefits. This is despite the fact the claimant knew by the end of May 2014 that the policy would be cancelled unless he made payment.

Justice Davies also commented on the standard of review of insurance arbitration decisions, following the Supreme Court of Canada’s recent decision in Minister of Citizenship and Immigration v. Vavilov, 2019 SCC 65.

On questions of law, the standard of review is correctness. On questions of mixed fact and law, the standard of review is palpable and overriding error.