At our weekly meeting, Athina Ionita discussed the Superior Court’s decision in Gagnon v. Sivasamboo, 2021 ONSC 3853. In this decision, the Court considered whether a plaintiff may maintain an action against a defendant’s insurer for declaratory relief respecting the applicability of a defendant’s insurance policy in the context of motor vehicle accident litigation.
This litigation stemmed from a motor vehicle accident that took place on March 21, 2017 in Cornwall, ON. The plaintiff alleged he was injured when the motor vehicle of the defendant, Mr. Sivasamboo, ran a red light and crashed into his vehicle. L’Unique General Insurance Inc., the insurer of Mr. Sivasamboo, denied coverage for the accident based on a material misrepresentation, making their policy void ab initio. The defendant, Co-Operators General Insurance Company, is the plaintiff’s insurer, whose policy may provide for payment where the defendant’s vehicle was uninsured or inadequately insured at the time of the accident.
L’Unique brought two motions. In the first motion, L’Unique sought an order to be added as a Statutory Third Party under s. 258 (14) of the Insurance Act. In the second motion, they sought to strike certain paragraphs of the plaintiff’s Amended Statement of Claim where the plaintiff seeks declaratory relief as against them.
Motion to add third party granted
The Court granted the first motion. Section 258 (14) of the Insurance Act provides that, where an insurer denies liability under a motor vehicle policy, it shall, upon application to the court, be made a third party in any action to which the insured is a party. In those circumstances, there will be an order adding the applicant insurer as Third Party under the Act.
Motion to strike dismissed
The Court denied the second motion to strike paragraphs of the plaintiff’s Statement of Claim seeking declaratory relief. On August 11, 2020, the plaintiff served an Amended Statement of Claim, requesting a declaration that the L’Unique insurance policy in question was a valid and enforceable automobile policy of insurance on March 21, 2017. L’Unique sought to strike that paragraph as well as others, which allege that the applicant, L’ Unique, was the insurer of the defendant and that the defendant’s insurer has failed to properly respond to this claim and defend it on behalf of that defendant.
L’Unique argued that at this stage, there is no real issue between the plaintiff and the applicant insurer. They also submitted that the plaintiff does not have standing in this matter. They argued there is no privity of contract between the plaintiff and L’Unique, and as such, the plaintiff has no right, at this time, to raise the issue of enforceability of the defendant’s contract of insurance.
L’Unique further argued that the insurer is required by s. 258 (15) to defend their insured in this litigation and to provide, if necessary, payment up to the statutory limits of $200,000. They conceded that if the plaintiff recovers a judgment for more than the statutory limits, then the plaintiff, at that time, can maintain an action against the insurer pursuant to s. 258 (1) of the Act, and if it is determined that there is coverage, to have insurance proceeds applied towards those damages to the extent of the policy limits.
The plaintiff argued that declaratory relief can be granted by Courts on a discretionary basis. Relief of this nature is appropriate where the court has jurisdiction to hear the issue, the dispute is real and not theoretical, the party raising the issue has a genuine interest in its resolution, and the responding party has an interest in opposing the declaration being sought.
In dismissing the motion to strike, the Court said that judges have broad jurisdiction to make declaratory orders. This is particularly true where a substantial question exists such as whether the defendant driver had a valid and enforceable policy of insurance. Further, the plaintiff was not seeking payment of damages at this stage. Rather, he seeks declaratory relief as to the validity and enforceability of the policy. If successful, payment will still have to be sought.
The judge continued to say that the issue of coverage can be determined by the trial judge as part of the trial as a whole, by way of a preliminary motion, or as the Court may otherwise direct, all within the context of the litigation as a whole. All four litigants in this case have a real interest in having this coverage issue determined.
The judge mentioned as well that the Courts and parties have an affirmative obligation to find ways to provide affordable, effective, and accessible means of interpreting and enforcing the rights of parties to a particular piece of litigation. The judge says that this is going to be even more important in the upcoming months and perhaps years that it will take the courts to deal with the massive backlog of civil cases awaiting adjudication or other resolution in our post-pandemic world.
The insurer’s motion to strike the paragraphs of the Amended Statement of Claim was therefore dismissed.