SUPERIOR COURT OF JUSTICE - ONTARIO

Court File No.: CV-11-442323
Date: July 18, 2012

RE: ALICE AZAD v. ARA DEKRAN and SALVATORE CANZOLINO

BEFORE: Master R. Dash

COUNSEL:
Kevin Motley, for the proposed defendant Personal Insurance Co.

No-one appearing for the plaintiff, for the defendant insured Dekran or for the defendant Canzolino, although duly served

REASONS FOR DECISION (transcribed)

[ 1 ] The Personal, the insurer for the defendant Dekran, wishes to intervene in this action under rule 13.01 as an added defendant. The insurer wishes to allege by way of defence that the accident did not occur or was staged and to crossclaim against Dekran. It prefers this route rather than being added as a statutory third party under section 258(14) of the Insurance Act (“Act”) since as a statutory third party it may not take a position incongruent with that of their insured: Kapileshwar v. Sivarajah , [2008] O.J. No. 4501, 75 C.P.C (6 th ) 336, paragraphs 15 and 29 .

[ 2 ] In my view it is not an appropriate use of rule 13.01 for a tort insurer to have itself added as a party defendant, even where it alleges a staged accident between the plaintiff and its insured. One of the purposes of section 258 of the Act is, in a situation where an insurer denies coverage, as it has done here, to permit it to contest the plaintiff’s claim (both liability and damages) because, despite the denial of coverage, it may become liable to the plaintiff for the statutory minimum if there has been a policy breach, or the full damages awarded to the plaintiff if later found to be no breach: Kapileshwar paragraph 9.

[ 3 ] The plaintiff’s action against the insured however is not the forum to decide the issues between the insurer and insured, which may be decided in subsequent proceedings between insurer and insured, including a proceeding to recover the statutory minimum if paid out to the plaintiff (since as here the insurer wishes to crossclaim against the insured and this is the equivalent proceeding) or in an indemnity action by the insured or in a subsequent proceeding by the plaintiff for payment under section 258(1) of the Act: see Kapileshwar paragraphs 14, 17 and 29. Indeed, the insurer, whether statutory third party or not, cannot raise a policy breach as a defence as against the plaintiff to the extent of the statutory minimum: Kapileshwar paragraph 9.

[ 4 ] Of course if there was no accident or if the action was staged then the plaintiff will not be entitled to damages and the insurer, in its capacity as statutory third party can plead a staged accident.

[ 5 ] This leads me to the insurer’s position that it wishes to be a defendant, not only to take an incongruent position to its insured by way of defence (by alleging the defendant is acting in concert with the plaintiff in staging the accident) but also to crossclaim against their insured for any damages it must pay to the plaintiff. That of course makes no sense. If the trial court awards damages to the plaintiff, despite the insurer as statutory third party or as defendant defending on the basis of staged accident, then that must mean that the trial court has decided that there indeed was a collision causing damages to the plaintiff and the accident was not staged. As such there would be no basis to crossclaim against Dekran based on staged accident. Conversely if the trial court denies the plaintiff’s claim on the basis of staged or no accident, then there would be no damages awarded against the insurer for which indemnity could be sought. Counsel suggests that perhaps if the plaintiff’s claim was valid, but Dekran intentionally struck him (as improbable as that may be) then there would be a basis for an indemnity claim. That may be true, but that is not to be decided in the plaintiff’s claim but, as set out earlier in these reasons, in a subsequent proceeding.

[ 6 ] The insurer, as statutory third party, can do everything it could do as defendant to defeat the plaintiff’s claim for liability and damages, on the basis of staged accident or otherwise. The only thing it cannot do is plead as against its insured in the plaintiff’s action, or to allege that the defendant acted in concert with the plaintiff (although clearly that would be the implication), but it is not prejudiced by this prohibition since it has all the rights against the insured to seek indemnification in a subsequent proceeding.

[ 7 ] The situation here is identical to that in Kapileshwar , except that the insurer was already a statutory third party, since it had pled no collision or staged accident and no injury to the plaintiff, just as here. In Kapileshwar the insurer, as statutory third party, sought leave to have discovery of its insured in the action and this was granted because the insured and the plaintiff were, in the insurer’s version of events, acting in concert, putting the plaintiff and defendant on the same side of the fence as against the insurer, thereby acting to the prejudice of the insurer and creating the adversity necessary to permit the discovery under rule 31.03(3) at least as to the circumstances of the accident: see Kapileshwar paragraphs 30 to 32. It is of course the circumstances of the alleged staged accident for which discovery would be sought. There is no reason why the Personal, as statutory third party, could not have the same discovery rights as against Dekran, which they could exercise by serving a notice of examination once Dekran either defends or is noted in default (see rule 31.04(2)).

[ 8 ] The Personal has provided me with the decision of Master Abrams in Esho v. Dekran 2012 ONSC 3638 where she granted the relief as sought here. In my view she was wrong in doing so and in particular in concluding that the insurer would have “fulsome discovery rights” (which as I have pointed out it can have both as against the plaintiff and Dekran in its capacity as statutory third party) and to assert a crossclaim (which as I have pointed out, cannot result in an indemnification claim whether staged or not staged, or in very limited circumstance to be determined in a subsequent action). I know of no other case where a tort insurer has been permitted to be added, on its own motion, to intervene as a defendant rather than availing itself of its right to be added as a statutory third party under the Act.

[ 9 ] The motion by the Personal to be added as a party defendant is refused. The alternate relief of being added as a statutory third party is granted.

[ 10 ] Order: order to go as requested in pargraphs 2, 3 and 4 of relief requested.

“Master Ronald Dash”