Canada: Defending An Action Without An Insured? When A Claim Is Served Upon The Insurer By Substituted Service, Where The Rules And Practice Should, Could Or Might Lead

Last Updated: March 27 2015
Article by Edward Chadderton

The issue of plaintiff's counsel serving their statement of claim directly upon a defendant's insurer, by way of an order for substituted service, has been around for some time.

The leading case on the issue is Laframboise v. Woodward (2002), 59 O.R. (3d) 338, 2002 CarswellOnt 1448 (Ont. S.C.J.)

It has no history. It does not have negative treatment. It has not been distinguished or overruled.

In the decision Justice Quinn decides to summarize the state of the law on the issue and make very pointed comments on the proper procedure to be followed in obtaining such an order.

The key components of this decision are:

  • Has the defendant satisfied the test for substituted service,
  • Met the requirement to take all reasonable steps to effect service personally, and
  • That such an order should not be made lightly.

The decision sets the bar high, requiring plaintiff counsel to go as far as demonstrating the use of a skip tracer to locate the defendant, before having moved on to seeking an order allowing service of the claim upon the defendant's insurer.

It is also the decision which captures and sets in to the common law what is known as the "undertaking".

The undertaking is given by plaintiff's counsel. In doing so he or she undertakes – originally done in a letter – that the plaintiff will not move to strike out the defence of the defendant if the insurer is unable to produce the defendant for examinations for discovery.

Justice Quinn ruled that it was not sufficient to merely provide the undertaking in a letter, but rather

"it must be contained in the supporting affidavit. And, it should be part of the order."

I have long held that the principle would be the same for the inability to provide a sworn affidavit of documents, and that the undertaking should extend to include this.

The issue was later commented on by Master Dash in the decision Chambers v. Muslim (2007), 2007 CarswellOnt 6438, 87 O.R. (3d) 784 (Ont. Master) where at para. 25 he says that it has been his experience that insurers may agree not to oppose the motion for substituted service but with conditions such as those above, that the order include a term that the defence filed not be struck if the insurer is unable to produce their insured for discovery.

This highlights a new development that could cause some concern.

Previously such motions were simply brought ex parte as was the case in Laframboise v. Woodward, and any defects in the order could be dealt with by defence counsel, after the insurer was served with the statement of claim.

The right to bring a motion setting aside, varying or amending Ex parte orders, is entrenched in Rule 37.14 as long as it is done expeditiously.

Plaintiff's counsel have however, shifted tactics, and begun a practice of bringing the motion on notice, serving the target insurer with the notice of motion. Thus far, in our experience insurers have simply confirmed that coverage was in place and allowed the motion to proceed unopposed, often resulting in an Order being granted permitting service of the claim on the insurer, but without any sign of the undertaking.

This then leaves defence counsel with the difficult issue of having to seek an amendment of an Order made on notice. Rule 59.06 can be used to seek such an amendment, but the test is higher, requiring demonstration of an omission, or mistake.

In a recent unreported endorsement, the court was highly critical of the insurer as follows:

(The Insurer) had notice of the substitutional service motion. It did not oppose it. It did not seek any terms such as an U/T [undertaking].

They have not moved expeditiously to amend. The moving party has failed to establish proper grounds to amend pursuant to 59.06

As such, a motion to insert the undertaking into an order for substitutional service on the insurer was denied.

There are have been at least 3 other examples of plaintiff's counsel seeking similar orders in recent years.

There is one simple and effective way to respond and avoid an order that could cripple the ability to defend a claim.

Insurers need to respond to and/or oppose any motions for substitutional service they receive.

The first response can be to indicate that any Order sought, that does not include the undertaking both in regards to attendance at examinations for discovery, and for service of an affidavit of documents, will not be granted unopposed.

Counsel needs to be assigned either in-house, or externally to deal with the motion. The time when we can easily and cost effectively demand changes and appropriate terms is shortly after service of the motion.

If the motion is returnable soon, a demand for an adjournment is needed to allow counsel to be appointed and respond. At this point the Insurer is a non-party upon whom relief is sought. The normal rules will not apply in terms of service and any reasonable adjournment request will be refused at counsel's peril. A draft wording for the undertaking can be circulated for adjusters to propose.

Furthermore a test case needs to go forward seeking more. The insurer and insured are also both hamstrung by the fact that in most cases, the Plaintiff is seeking amounts in excess of the policy limits. It makes perfect sense, that if the Plaintiff wishes to use the shortcut of serving the defendants insurer, they should be limited to what that insurer can provide, namely the policy limits of the defendant.

A test case and expansion of the undertaking would remove the problematic issue of a Plaintiff obtaining a judgement in excess of the limits in one of these cases and seeking to enforce it against a defendant who has never received official notice of the claim. Hopefully an opportunity will present itself soon.

Ted Chadderton

Ted has been a partner since 2005, following two years of practice in Toronto and five in Barrie. He handles complex litigation files, ranging from product liability, facility liability, insurance disputes and other multi-party litigation. Ted is known for being a voice of reason on files and strives to consider not just his clients' legal position but also a broader consideration of their business or personal interests.

http://www.chcbarristers.com/lawyers/edward-j-chadderton/

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions