On July 3, 2021, the Applicant was involved in an accident while driving with an expired license. Security National Insurance refused to defend or indemnify him on the basis that he made false statements in his claim and was driving with an expired license at the time of the accident. The Applicant argued he acted with due diligence and sought relief from forfeiture.
Background
On July 3, 2021, the Applicant, Urban Lennox Gibbs, suffered a sudden medical episode while driving, causing him to lose consciousness and rear-ended the vehicle in front of him. At the time of the accident, Mr. Gibbs was driving with an expired G2 license. On the date of loss, Mr. Gibbs held an insurance policy with the Respondent, Security National Insurance Company.
Position of the Parties
Security National acknowledged liability under the policy for the property damage claims arising from the accident, but denied a duty to defend or indemnify Mr. Gibbs in the personal injury action on the basis that he was driving with an expired license at the time of the accident. Security National further asserted that Mr. Gibbs willfully made false statements in respect of his claim, rendering his claim invalid under s. 233(1)(c) of the Insurance Act.
Mr. Gibbs brought an application under Rules 14.05(3)(d) and (h) of the Rules of Civil Procedure, asserting that he made out the defence of due diligence to the offence of driving without a valid license. He requested a declaration that he was entitled to coverage under his policy with Security National. Alternatively, he argued that he was entitled to relief from forfeiture under s. 98 of the Courts of Justice Act, and s. 129 of the Insurance Act.
The Decision
On appeal to the Superior Court of Justice, the court granted the application, finding that Mr. Gibbs successfully established a defence of due diligence to the offence of driving without a valid license. Alternatively, the court held that he was entitled to the equitable remedy of relief from forfeiture.
Due Diligence Defence
The court explained that the defence of due diligence is established where the person accused of an offence either holds a mistaken belief that would render the act or omission innocent if true, or takes all reasonable steps to avoid the particular event. They may show a reasonable misapprehension of facts or reasonable care with respect to the offence. The court emphasized that the test is one of reasonableness, not perfection.
The court held that Mr. Gibbs acted reasonably in maintaining a valid license immediately before the January 2020 expiry and in attending for a road test on February 18, 2020. Despite arguments by Security National that Mr. Gibbs' road test was not cancelled by DriveTest, the affidavit they relied on was rejected due to its reliance on hearsay and given the affidavit did not specifically address Mr. Gibbs' road test, rebut the road test cancellation email Mr. Gibbs received, or provide information on tests cancelled for reasons other than COVID.
The court further found that Mr. Gibbs' belief that his license was covered by the COVID grace period, which began 11 days after his road test was cancelled and 34 days after his license expired, was reasonable despite being mistaken. The court relied on media reports about road test cancellations, the provincial suspension of license expirations in March 2020, and information from the Government of Ontario website, which indicated that booking a road test before license expiry might extend its validity. The court concluded that this led Mr. Gibbs to believe that, despite road test cancellations, his license remained valid, including at the time of the July 2021 accident.
The court dismissed Security National's argument that Mr. Gibbs had a 25-year history of letting his license lapse. It also rejected the argument that he was required to confirm his coverage with the Ministry, emphasizing that due diligence does not require perfection, and that Mr. Gibbs was not expected to make every inquiry conceivable to satisfy himself that he was covered by the grace period.
Further, the court was persuaded that Mr. Gibbs acted reasonably in trying to reschedule his road test in 2020 and 2021, prior to the accident.
Accordingly, the court held that Mr. Gibbs established the defence of due diligence to the offence of driving without a valid license and granted a declaration that he was entitled to insurance coverage under his policy with Security National.
Relief from Forfeiture
The court also accepted Mr. Gibbs' submissions that, should his defence of due diligence fail, he was entitled to the equitable remedy of relief from forfeiture under s. 98 of the Courts of Justice Act and s. 129 of the Insurance Act.
In reaching its decision, the court considered the three factors to establish relief from forfeiture: the applicant's conduct, the gravity of the breach, and the disparity between the value of the property forfeited and the damage caused by the breach.
In applying the first part of the test, the court highlighted several factors: Mr. Gibbs paid his premiums on time; he did not deliberately avoid renewing his license; he reasonably believed the COVID grace period applied; he did not act in bad faith and cooperated with Security National by providing a statement, evidence in the proceeding, and attending cross-examination. Additionally, he continued to act reasonably after the accident by retaining counsel to defend the personal injury action so that Security National would not be prejudiced if it assumed his defence.
Regarding the second part of the test, the court found Mr. Gibbs' breach of driving with an expired license to be minor and not fundamental to the contract. The court noted that he held a valid license from the Bahamas and was an experienced driver. The court also found his breach comparable to the breach committed by the insured in Kozel, which the Court of Appeal characterized as minor. Further, his license expired just 34 days before the province-wide grace period took effect. The court again dismissed any relevance of past license expirations over the previous 25 years.
Considering the third factor, the court found a significant disparity between the value of the coverage forfeited and the damage caused by Mr. Gibbs' breach. The court found it difficult to identify any damage or prejudice caused to Security National by Mr. Gibbs' breach. In contrast, denying Mr. Gibbs relief would leave him facing the loss of at least $800,000 in insurance coverage, the burden of funding his own defense costs, potential personal indemnification of the plaintiff, subrogation claims, and exposure of his personal assets.
The court determined that the disparity was great, and Mr. Gibbs was therefore entitled to the equitable remedy of relief from forfeiture.
Despite Security National's argument that Mr. Gibbs made false statements in his claim, in violation of s. 233(1)(c) of the Insurance Act and barring him from seeking relief from forfeiture, the court rejected this argument outright.
Key Takeaways
This case reaffirms that the standard for a due diligence defence is reasonableness, not perfection. A reasonable misapprehension of facts or acting with reasonable care, such as attempting to schedule a road test, may be sufficient to excuse non-compliance with licensing requirements.
The decision also underscores the courts' readiness to use equitable remedies, such as relief from forfeiture, where a breach is minor, unintentional, and does not prejudice the insurer. Thus, relying solely on technical non-compliance, without considering factors such as fairness and good faith, may be insufficient to deny coverage. Additionally, insurers must be prepared to demonstrate actual prejudice if they wish to oppose relief from forfeiture.
Overall, this case signals that courts are increasingly inclined to overlook technical breaches where denying coverage would be disproportionately unfair. Insurers must provide strong, substantiated evidence when disputing policyholder actions. If the policyholder has acted in good faith, minor or unintentional breaches, will likely not justify denying a claim. In post-COVID contexts, where grace periods or administrative backlogs may be factors, insurers should approach claim denials cautiously, due to the risk of judicial intervention on equitable grounds.
Case Citations: Urban Lennox Gibbs v. Security National Insurance Company et al, 2025 ONSC 4656 (CanLII)
1. Kozel v. The Personal Insurance Company, 2014 ONCA 130
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