Mallory v. Werkman Estate 2015 ONCA 71, February 2,
On February 6, 2005, three motorcycle drivers were racing.
One of the drivers, Mr. Werkman, lost control and struck a car
seriously injuring the driver, Mr. Mallory. Mr. Werkman
died. Mr. Mallory, sued Mr. Werkman's Estate, the other
two motorcycle drivers (Mr. Nemes and Mr. Mihali), as well as his
own insurer (Security National) for underinsured/uninsured
Mr. Mihali's insurer, Royal and Sun Alliance
("RSA"), appointed defence counsel, but reserved their
right to limit or dispute coverage. While RSA appointed
separate coverage counsel, RSA was not added as a statutory third
party to the proceeding.
Mr. Mallory reached a settlement with Mr. Mihali, RSA, and
Security National. Under the terms of the settlement a trial
was to be conducted to determine if the Mr. Mihali was liable to
Mr. Mallory. If Mr. Mihali was not liable, then
Security National was to pay the settlement monies. If Mr.
Mihali was liable, RSA would pay at least $200,000 of the
settlement amount, and perhaps the full amount if Mr. Mihali was
not in breach of the conditions of his insurance policy.
In February 2014 the trial judge found that Mr. Mihali was,
"engaged in a joint venture" with Mr. Werkman in which
they encouraged each other to drive at excessive speeds etc.
Mr. Mihali was found to bear 25% liability. The trial
judge dismissed the action as against Security National on the
basis that Mr. Mihali was insured at the time of the
Following the trial decision RSA's coverage counsel wrote to
the trial judge and counsel and expressed concern about the trial
judge's findings regarding coverage. Coverage counsel was
advised to contract the trial coordinator, but did not do so.
Instead RSA's coverage counsel brought a motion to
intervene in the appeal.
The Court of Appeal denied the motion. The Court noted the
trial judge had asked for clarification of the issues to be
determined at trial and had been advised by Mr. Mihali's
defence counsel that if no findings were made as to whether Mr.
Mihali was racing Mr. Mihali would have coverage, and the claim as
against Security National could be dismissed.
The Court was very critical of RSA's failure to make a
decision regarding coverage despite having had a 45 minute video of
the motorcycles on their high speed ride for many years prior to
trial. The Court stated "(RSA) appointed and paid for
defence counsel and decided to delay a determination of coverage
until after the trial...it would have been well aware of the
importance of ensuring its coverage position was properly
communicated and the scope of the trial was clearly
defined". Specifically RSA could have taken steps to be
added as a statutory third party, and did not do so and therefore
RSA was "not in a position to now complain on appeal about
confusions surrounding coverage."
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