Two cases decided within the last year have confirmed that an
insurer which adds itself as a Third Party pursuant to Section 258
(14) of the Insurance Act (the off-coverage insurer) is required to
answer questions and disclose information in relation to the
insurer's off-coverage position. No longer can the
insurer wait until the final determination of the main action prior
to dealing with the insurance coverage issue.
In the case of Lica v. Dhaliwal, 2015 ONSC 3888, the
off-coverage insurer was required to answer questions posed by the
Plaintiff by way of written interrogatories and subject to the
potential need for further input from the Court with respect to
issues of relevance, prejudice and privilege. In the case of
Prentzas v. Rivera, 2015 ONSC 5867, the insurer was
required to produce documentation, including portions of the
broker's file, the insurance application, the insurer's
notes on issuing and cancelling the policy, correspondence
regarding the policy and its cancellation, and underwriting
guidelines regarding cancellation.
The basic reasoning behind this disclosure obligation relates to
the Plaintiff having to satisfy the OPCF 44R insurer that the full
limits from the off-coverage insurer's policy are "reduced
by operation of law to the statutory minimum limits" in order
to satisfy the OPCF 44R insurer that the Plaintiff is an
inadequately insured motorist.
Further, the Court, in both cases, reasoned that the disclosure
has nothing to do with any determination of the coverage issue as
between the off-coverage insurer and its insured. It has to
do with allowing the OPCF 44R insurer to assess its exposure and
set proper reserves. It's also aimed at facilitating
potential settlement as between the OPCF 44R insurer and the
Plaintiff. As indicated by Justice Donohue in the
Prentzas case, "personal injury claims settle often
because the surprises have been removed by the Rules of Civil
Procedure, which favour disclosure of all documents relevant to an
issue in the action."
I am aware that the Lica decision is under Appeal.
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