If an automobile insurance company refuses to defend their insured who is being sued for damages arising from a car accident, the insurer has a statutory right to be added as a third party to a claim where a plaintiff is seeking damages from that accident. The purpose of this scheme is to give the insurance companies standing in the lawsuit so as to be in a position to put the Plaintiff to the strict proof of liability and damages, which is important because in Ontario an insurer remains potentially responsible to pay the injured plaintiff up to $200,000 for any judgment obtained against the owner and/or driver who thought they had the insurance coverage.
Normally the insurers are granted this relief as a matter of right, and this relief rarely goes challenged, provided the insurer proves that they took an off-coverage position with their insured.
However, in this case, the plaintiff challenged the motion, primarily because they took the position the motion was brought too late: more specifically, it was brought after the plaintiff obtained default judgment. In this particular instance, the plaintiff moved very quickly to note the defendant in default, and then obtain a default judgment in excess of $700,000.00. The plaintiff found it offensive that the insurer then strolled in and said they wanted to contest liability and damages as a Statutory Third Party, after giving their insured person notice that they were denying insurance coverage.
The primary issue for the court was whether the insurance company lost the right to this relief on the basis of “insurer misconduct, waiver or prejudice.” We still do not know the answer to this q uestion, because the court specifically took the position they didn’t have to answer it. In this regard, the court said they were satisfied that the insurer took an off-coverage position, and:
“In the circumstances of this case, I find it is unnecessary for me to determine whether the court has discretion to deny an insurer’s application under s. 258(14).
For the reasons that follow, the court finds that…(the insurance company)… has satisfied the conditions for being made a statutory third party. Assuming the court has discretion to refuse the insurer’s application due to waiver, misconduct or prejudice, I find that no such factors arise on this record that would justify dismissal of the insurer’s application on that basis. Fairness in these circumstances requires that the motion be allowed.”
Hills v. Suitor, 2022 ONSC 914
https://www.canlii.org/en/on/onsc/doc/2022/2022onsc914/2022onsc914.html