Canada: Insurance Law 2016: The Year In Review And A Look Ahead

Last Updated: January 4 2017
Article by Emily Durst

The authors of MT Insurance Law Blog strive to provide our readers insight into changes and emerging trends in Canadian insurance litigation. As this year comes to an end, it is a good time to look back at 2016 and recall significant developments and how they will affect insurance claims in 2017 and beyond.

This year ushered in one of the most substantial changes to Ontario's accident benefits regime since its inception. The most significant of these changes was the end of FSCO's dispute resolution mechanism. Now, new AB disputes are heard at the new Auto Accident Benefits Service at the Licencing Appeals Tribunal. Highlights of other changes include eliminating the right to sue in Superior Court for AB disputes, abandoning the mediation pre-requisite and implementing Case Conferences when arbitration commences. Additionally, the dispute process has been streamlined, with aggressive timelines for filing responses implemented. The procedural changes in AB have also impacted the handling of tort claims, for example whether an insurer should consider making advanced tort payments. These changes have created various transitional issues which will likely continue into next year as this new process unfolds.

The sharing economy and associated implications for insurance coverage continues to reverberate throughout the industry. In 2015, we were left wondering how the market would react to ridesharing apps such as Uber and whether personal automobile polices would respond to claims. In 2016, however, there was a significant shift among certain insurers that embraced ridesharing and began offering products that cater to certain rideshare activities. It is important to note that ridesharing is only one segment of the ever-growing sharing economy. Beyond 2016, the insurance industry will undoubtedly keep a watchful eye on other so-called side hustles growing in popularity, such as renting out one's home, car or driveway.

In the case of Basandra v. Sforza, the Ontario Court of Appeal laid to rest an issue that is commonly confronted in MVA claims – whether a judgment in a tort action can be reduced by amounts received from the corresponding AB claim. Having regard to the relevant provisions of the Insurance Act, the Court answered this question in the affirmative, with the caveat that an award can only be reduced by a corresponding statutory accident benefit, on a benefit-by-benefit basis. As an example, an award for housekeeping can be reduced by a housekeeping benefit, but not by a medical / rehabilitation benefit.

The 2016 decision of J.J. v. C.C. left a significant cliff-hanger for insurers. In this case, the Court of Appeal found that a small-town garage and car dealership owed a duty of care to a minor who was injured after participating in the theft of an unlocked vehicle from the dealership's premises. The Court's finding that there existed a sufficiently close and direct relationship between the garage and a plaintiff who entered the premises for the purposes of committing a crime could have far-reaching implications for occupiers. Stay tuned for a potential appeal to the Supreme Court.

More recently, the Supreme Court of Canada opined on faulty workmanship exclusions common to builder's risk insurance policies in the highly anticipated decision of Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. It was held that such clauses exclude only the cost of re-doing faulty work and not necessarily physical or resulting damage caused by such work. The result for insurers is the potential for increased risk under builder's risk policies and a strong precedent for the rule that courts will maximize coverage and minimize exclusions in cases of uncertainty.

On the CGL front, a snow removal contractor's duty to defend claims involving a municipal defendant as the additional named insured was addressed in the decision of Carneiro v. Regional Municipality of Durham et al v. Zurich Insurance. In late 2015, the Court of Appeal confirmed that where there is an unqualified duty to defend an action that is covered by the contractor's policy, the duty to defend the additional named insured is triggered. The starting point to this analysis is to determine the true nature of a pleading and whether the allegations, if proven true, fall within coverage. Going forward, it remains to be seen how this decision will affect those cases where an additional insured has independent negligence for an accident and where a municipality is an additional named insured on multiple responding policies.

Finally, we end 2016 where we began on the question of the indexed prejudgment interest rate in an MVA claim and whether it is a matter of substantive law which has retrospective application. This has been a topic of debate among the judiciary which has resulted in some uncertainty when assessing claims. Thankfully, the Ontario Divisional Court recently provided further clarity in the decision of Carr v. Modi. To summarize, the panel of three judges agreed with the lower court's decision that prejudgment interest is a matter of substantive law. Putting this in practical terms, the indexed prejudgment interest rate applies only to accidents after January 1, 2015. Stay tuned in 2017 for further clarity from the Ontario Court of Appeal on the issue of indexation of the statutory deductible and whether it applies to ongoing MVA injury claims commenced before August 12, 2015.

Looking ahead to 2017, we will continue to keep our readers appraised of the significant changes and decisions affecting Ontario's insurance industry. In the meantime, we wish everyone a happy holiday season and all the best in the new year!

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.

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