Ontario Superior Court rules driver lacked liability coverage due to pre-accident cancellation

The Ontario Superior Court ruled that a driver did not have liability coverage at the time of an accident, as it had been cancelled before the incident.

In Co-operators v Hollands, 2024 ONSC 387, Brian Hollands was involved in a motor vehicle accident in which two of his passengers were injured. The passengers subsequently sued Hollands, who sought coverage from his insurer, Co-operators Insurance.

Co-operators Insurance filed a declaration stating that it was not obligated to defend or indemnify Hollands, arguing that he had cancelled his liability coverage before the accident. Hollands opposed this application, claiming he had coverage on the accident date.

Definity Insurance Company joined the proceedings as an intervenor, as it would be liable if Co-operators succeeded. Definity contended that any change or cancellation Hollands requested did not comply with the requirements of the Insurance Act, rendering it ineffective.

Co-operators' witness, an insurance agent, testified that Hollands had instructed to change his car's coverage from collision to comprehensive before the accident. However, Co-operators initially failed to disclose critical business records corroborating this change. After a brief adjournment, the missing documents were presented, and the trial continued.

Under cross-examination by Definity, Hollands admitted to requesting the coverage change but claimed he intended it to take effect after the accident. The court had to determine whether Hollands had cancelled his liability coverage and if Co-operators had complied with legal requirements to make the change effective.

The Ontario Superior Court of Justice ruled in favour of Co-operators on both issues, concluding that Hollands had indeed cancelled his liability coverage before the accident and that the change was legally effective as Co-operators met all statutory requirements.

The issue of costs remained unresolved, with Co-operators seeking substantial indemnity costs of $103,375.96 from Definity. Co-operators argued that Definity's actions unnecessarily expanded the scope and cost of the proceedings. Definity countered, suggesting costs should be limited to $58,884, arguing that Co-operators' late disclosure of key documents had prolonged the trial.

Ultimately, the court declined to award substantial indemnity costs to Co-operators, citing its conduct as a factor that lengthened the proceedings. The court ordered Definity to pay Co-operators $70,000, inclusive of costs, disbursements, and HST.