Court File and Parties

Oshawa Court File No.: CV-15-93583-00A1 Date: 20230921

Superior Court of Justice - Ontario

Re: Kellie Michele Gallagher, Plaintiff And: Tammy Lea Todish and Desjardins General Insurance Company, Defendants And: Pafco Insurance Company, Third Party

Before: The Honourable Madam Justice J. Cameron

Counsel: Andrew Cottreau, Counsel for the Defendant Desjardins Michael Burgar, Counsel for the Third Party

Heard: August 18, 2023

Ruling on Summary Judgment Motion

Overview

[1] Pafco Insurance Company (“Pafco”) brings this motion for summary judgment dismissing the third-party claims against it.

[2] Desjardins General Insurance Company (“Desjardins”) brings a cross-motion for summary judgment seeking a declaration that the third party, Pafco insured the Defendant, Tammy Lea Todish, under automobile insurance policy No. 5 58 296977 on November 25, 2014, which was the date of a motor vehicle accident involving Ms. Todish and Kellie Michelle Gallagher, the Plaintiff.

[3] The parties on these motions agree that the third-party claim does not involve a genuine issue for trial and may be determined by way of a summary judgment motion.

The Facts

[4] The facts are mostly not in dispute. In May 2014 Ms. Todish was sent a notice of cancellation of her automobile insurance by Pafco for non-payment of her premiums. She took steps to pay her arrears and maintain her insurance for the next few months. On September 10, 2014, Ms. Todish was once again sent a notice of cancellation for non-payment of her premiums. The wording of this notice was identical to the wording of the notice sent to Ms. Todish in May. It reads:

Your insurance will terminate on the date and time stated above unless the Amount Past Due which includes any necessary administration fees is received in full, in the form of guaranteed funds, no later than 12:00 noon on the business day before the termination date. Payment must be made directly through your licensed insurance representative.

If you were previously on a Monthly Payment Plan, payment of just the “ Amount Past Due ” will be insufficient to reinstate your monthly payment plan and will result in a subsequent cancellation notice being issued. A subsequent cancellation notice could jeopardize your future payment options.

Minimum amount required to reinstate monthly payment plan: $858.22.

[5] The cancellation date listed in the notice was October 13, 2014. The name and phone number of Ms. Todish’s insurance broker was also listed on the notice.

[6] On November 25, 2014, Ms. Todish was in a rear-end motor vehicle accident with the Plaintiff. On that date she called her broker to ask what would be required to reinstate her insurance. When she was told the amount, she told the broker she did not have the funds to pay. She did not report the accident.

[7] On October 27, 2015, the Plaintiff issued a Statement of Claim against Ms. Todish and her insurance company Desjardins. This was served on Desjardins on December 2, 2015. Desjardins issued a Statement of Defence and Crossclaim on January 30, 2016. On January 26, 2016, the lawyer for Desjardins wrote to Pafco asking for the complete underwriting file in relation to Ms. Todish. Pafco wrote back on February 9, 2016 indicating that they were not insuring Ms. Todish at the time of the accident and they could not provide the file without Ms. Todish’s written consent.

[8] On May 11, 2017, after the Plaintiff was unsuccessful in finding and serving Ms. Todish, the Plaintiff obtained an order for substituted service. On August 16, 2017, Ms. Todish was noted in default. From February to September 2018 Desjardins “renewed” efforts to obtain Pafco’s underwriting file.

[9] After filing a motion to obtain the underwriting file, Pafco agreed to provide the underwriting file to Desjardins who obtained the file which included the policy termination letter, on November 5, 2018. On March 21, 2019, Desjardins amended its Statement of Defence to plead that Ms. Todish had valid insurance with Pafco at the time of the accident.

[10] On April 8, 2021, Desjardins settled the Plaintiff’s claim for $100,000 in exchange for a Release and Assignment. On November 1, 2022, Pafco brought this motion for summary judgment. Desjardins brought their cross-motion for summary judgment.

[11] Ms. Todish has never disputed the position of Pafco on the termination of her insurance policy. She was noted in default on the main action and has not issued any third-party claim or other proceeding on the insurance coverage issue.

The Position of the Parties

[12] Pafco submits that Desjardins is estopped from pursuing their third-party claim because it was not filed within the two-year limitation period. Dejardins was aware that the policy had been terminated in February 2016. They did not issue a third-party claim until May 23, 2019, over 3 years after they delivered a Statement of Defence in the main action.

[13] Pafco asserts that Desjardins’ claim for contribution and indemnity against it is not valid or sustainable because the Pafco insurance policy was terminated on October 13, 2014 and was therefore not in effect at the time of the motor vehicle accident. There is no merit to the submission of Desjardins that the Pafco notice of termination was deficient.

[14] Finally, it is the position of Pafco that this court does not have jurisdiction to provide the relief sought by Desjardins, that being a declaration.

[15] Desjardins submits that they did not have knowledge of the deficient notice of cancellation until they received the file in November 2018. Therefore, their claim was filed within the limitation period. In any event, the remedy sought is a declaration, therefore there is no limitation period. Finally, this court does have jurisdiction to make a declaration.

The Issues

1. Was the notice of cancellation of insurance deficient and therefore was there a valid insurance policy in place at the time of the accident?
2. Is Desjardins estopped from pursuing their third-party claim because they filed it outside the limitation period?
3. Does this court have jurisdiction to make a declaration with respect to the existence of a valid insurance policy at the time of the motor vehicle accident?

The Law and Analysis

[16] On a motion for summary judgment, pursuant to Rule 20.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the Court must be satisfied that there is no genuine issue requiring a trial. The moving party bears the legal burden of showing that there are no genuine issues for trial. There will be no genuine issue for trial where a judge can reach a fair and just determination on the merits of the motion. A judge can make such a determination where the process allows the judge to make necessary findings of fact; where the process allows the judge to apply the law to the facts; and where the process is a proportionate, more expeditious and less expensive means to achieve a just result. Hryniak v. Mauldin, 2014 SCC 7, 2014 1 S.C.R. 87, at para. 49.

[17] I agree with the parties that this is a case that should be decided by way of summary judgment.

Was the notice of cancellation of insurance deficient and therefore was there a valid insurance policy in place at the time of the accident?

[18] Desjardins’ complaints with the notice of cancellation used by Pafco are that they used the generic phrase “guaranteed funds” instead of spelling out the 3 acceptable methods of payment and that the address of the appropriate place to pay was not specified.

[19] An insurer’s requirements to cancel a policy of automobile insurance are provided under condition 11 of O. Reg 777/93 under the Insurance Act, R.S.O. 1990, c. I.8. The relevant portions of this state:

Termination

11. (1.2) Subject to subcondition (1.7), if the insurer gives a notice of termination under subcondition (1) for the reason of non-payment of the whole or any part of the premium due under the contract or of any charge under any agreement ancillary to the contract, the notice of termination shall comply with subcondition (1.3) and shall specify a day for the termination of the contract that is no earlier than,

(a) the 30th day after the insurer gives the notice, if the insurer gives the notice by registered mail; or

(b) the 10th day after the insurer gives the notice, if the insurer gives the notice by personal delivery, prepaid courier or electronic means.

(1.3) A notice of termination mentioned in subcondition (1.2) shall,

(a) state the amount due under the contract as at the date of the notice; and

(b) state that the contract will terminate at 12:01 a.m. of the day specified for termination unless the full amount mentioned in clause (a), together with an administration fee not exceeding the amount approved under Part XV of the Act, payable in cash or by money order or certified cheque payable to the order of the insurer or as the notice otherwise directs, is delivered to the address in Ontario that the notice specifies, not later than 12:00 noon on the business day before the day specified for termination . [Emphasis added].

[20] Courts have emphasized that the power of cancellation must be strictly exercised. The right of an automobile insurer to terminate a contract is severely restricted. The statutory conditions must be strictly complied with. Failure to comply with them keeps them bound by the policy. Lombard Canada v. Kent & Essex Mutual Insurance Co., at para. 26. There are tribunal decisions that have found terminations to be invalid because the cancellation letter failed to provide the 3 payment options. Doran v. RBC General Insurance Co.; 2016 ONFSCDRS 158; and Re ACE INA Insurance and State Farm Mutual Automobile Insurance, 2017 CarswellOnt 19588. These cases determined that consumer protection is the basis for requiring the various methods of payment be set out in the notice.

[21] As stated by Justice Pardu in her dissenting reasons in Ontario (Finance) v. Elite Insurance Company, 2018 ONCA 809, at paras. 76, one of the purposes of the compulsory automobile insurance regime is to protect third parties. “Certainty as to whether that policy is in existence is an important step in resolving claims for injuries resulting from accidents ….”

[22] The wording used by Pafco in their notice of cancellation to Ms. Todish was identical to the wording used by the insurance company in Allstate Insurance Company v. Her Majesty the Queen, 2020 ONSC 830. The court in that case did not assess the validity of the use of the term “guaranteed funds.” The court found that the notice of cancellation was insufficient because it did not provide an address where the payment needed to be made. It had the name of the agency and the phone number, just as in this case.

[23] Pafco argues that Ms. Todish clearly knew the policy had been cancelled because she called to enquire about a quote for insurance previously provided on the day of the accident. She did not defend her claim and at no point has challenged the termination on her own behalf. Pafco submits that I can consider Ms. Todish’s understanding as to the status of her insurance in my analysis with respect to whether or not there actually was a policy in existence at the time of this motor vehicle accident. I agree. Although not dispositive of this issue, the fact that Ms. Todish understood her policy had been cancelled can be considered in my analysis. Ms. Todish had received this very same notice in the recent past. She clearly understood it as she was able to make payments and bring her account into good standing.

[24] I am persuaded that the form of the notice of cancellation was not deficient because of the use of the words “guaranteed funds” as opposed to specifying she could pay by cash, certified cheque or money order. The term “guaranteed funds” encompasses all of these methods of payment and is sufficient to inform an insured person of all of the ways in which they can pay. This is not a situation where she was deprived of knowing that one of the acceptable payment methods existed.

[25] Condition 11 (1.3)(b) of O. Reg. 777/93 specifies that the wording of the cancellation notice shall advise the insured person that their payment must be delivered to the address in Ontario that the notice specifies. The notice provided by Pafco does not include an address where the payment can be made, rather it includes the name of Ms. Todish’s broker and their phone number. The letter was sent by registered mail presumably from Pafco. It was copied to Ms. Todish’s broker. Presumably their address was somewhere on the envelope, but that evidence is not before me. Justice Davies in Allstate at para. 39 held that the failure to provide the address where payment could be made in the notice of termination renders it deficient. Therefore, the policy remained in effect at the time. In Allstate, the insured party had also been given notice previously and made payments to bring his account into good standing. When that policy expired, he negotiated a new one. It is unclear if the wording of his first cancellation notice was the same as the latter. Further, in Allstate, the insured was not aware that a notice had been sent. It was sent to an address in which he no longer resided and the notice was returned with a notation that the party had moved. Justice Davies was reviewing a decision of an arbitrator. She noted that the arbitrator had considered the fact that the insured knew his policy was no longer in effect, but this fact was not dispositive of the issue.

[26] The plain language of the regulation does require the termination notice to include the address for payment. The interpretation given to the regulation must be consistent with the object of the regulation. Rizzo & Rizzo Shoes Ltd. (Re), [1998] S.C.J. No. 2, at para. 21. The Insurance Act and its regulations have been enacted to protect insured people in Ontario and must be interpreted in a manner that best achieves those goals. The statutory procedure for an insurance company to terminate an insurance contract is designed to ensure fair notice to the insured person and protect the insured person against unfair treatment. The termination provisions give an insured person time and opportunity to rectify the situation and maintain their insurance by making payments. Merino v. ING Insurance Co. of Canada, [2019] ONCA 326, at para. 42.

[27] In the circumstances -in the case at bar, I find that the fact an address was not included does not render the notice deficient. Ms. Todish was given the same notice a few months before this one. She clearly understood what she needed to do to render her account in good standing and prevent cancellation. In my view, providing the name of the agency to be contacted along with the phone number to call is sufficient to comply with condition 11 of O. Reg 777/93 under the Insurance Act. The notice clearly set out the criteria to be met to retain insurance, the date by which this needed to be done and the contact information of the agency that could assist her in doing so. There is no deficiency in the notice provided that renders it in conflict with the goal of the regulation to protect insured people from unfair treatment in providing a phone number rather than an address.

[28] Therefore, I find that there was no insurance policy in effect at the time of the motor vehicle accident and therefore summary judgment in dismissing the third-party claim is granted. Having made this decision, the other issues need not be determined.

[29] The parties agree that should this be this result, costs in the amount of $10,000 payable by the Defendant, Desjardins, within 30 days of the release of this ruling are awarded to the Third Party, Pafco.

Justice J. Cameron Released: September 21, 2023