April 26, 2021, Kitchener, Ontario
Posted by: Robert Deutschmann, Personal Injury Lawyer
HEARD BEFORE: Mr. Justice D. C. Shaw
DATE OF DECISION: April 22, 2021
Mr. Euler had insured his vehicle for several years for pleasure use with a two-kilometre commute noted daily for work. On the application form he left the form blank where the question regarding any business use for work – meaning ‘no’ business use. His policy and premiums were based on these facts.
There is a clause in the insurance contract which required Mr. Euler to notify his insurer if there was a ‘material change in risk’ to the use of the car. The obligations and conditions are clearly outlined in the policy. The policy also notes that:
“If you fail to meet your responsibilities, claims under this policy, with the exception of certain Accident Benefits, may be denied.”
On November 23, 2017, Mr. Euler reported to Economical that on October 28, 2017, he had been involved in a motor vehicle accident with another vehicle while he was using his vehicle to deliver pizzas. On March 5, 2018, Mr. Euler advised a claims adjuster that he was employed by Domino’s Pizza on the date of the accident and was returning from a delivery when the accident occurred.
On November 28, 2017, five days after reporting the accident, Mr. Euler cancelled the policy, signing a Cancellation Agreement, effective October 29, 2017. His vehicle had been scrapped following the accident. Economical refunded $92.56 in unearned premium.
Mr. Euler subsequently obtained a new insurance policy from Economical for another vehicle, with a guarantee that he no longer worked as a delivery driver.
Unfortunately for Mr. Euler he was notified In 2019, of a claim against him arising out of the October 28, 2017 accident. He reported this claim to Economical.
Economical denied Mr. Euler’s claim for indemnity and defence costs arising out of the accident, stating that Mr. Euler had breached the policy by failing to disclose on his application for insurance and at any point in the duration of the policy that he used his vehicle for business, delivering pizza, which was a change in risk material to the policy.
Mr. Euler and Economical agree to the following facts at trial:
- Mr. Euler admits that he was delivering pizzas at the time of the accident.
- The insurance policy was cancelled by Mr. Euler on November 28, 2017, effective as of October 29, 2017.
- No premiums were remitted by Economical other that the sum of $92.56, representing insured premiums after the date of the accident.
Mr. Euler submits that Economical has both a duty to defend and to indemnify under its policy with respect to the accident of October 28, 2017. He claims though that Economical waived its right to deny coverage by treating the policy as valid and subsisting, by failing to rescind the policy, ab initio, and by failing to refund the premiums that it had received, dating back to when Mr. Euler began using his vehicle to deliver pizzas.
Mr. Euler cites Howard Sand and Gravel Co. v. General Security Insurance Co., 1959 Carswell Ont. 142 (S.C.C.); Shepley v. Guarantee Co. of North America, 1988 Carswell Ont. 4086 (Ont. Gen. Div.); and Grant. v. Prudential Assurance Co., 1989 Carswell Ont. 665 (Ont. Dist. Ct). In particular, Mr. Euler relies on this statement in Grant, at paras. 7 and 8:
On learning of the non - disclosure the defendant [insurer] had three courses open to it as set out by McRuer C.J.H.C. in Ellis v. London – Can. Insurance Co. (citations omitted):
- to return the premium and to repudiate the ground of fraudulent and material representations and give notice accordingly;
- to retain the premium (for unexpired term) and thereby treat the contract as valid and subsisting;
- to give notice of cancellation.
Justice Shaw reviewed the evidence and the law and determined that Economical is not required to defend and indemnify Mr. Euler under the policy.
Mr. Euler failed to comply with the statutory requirements of his insurance contract when he failed to promptly notify his insurer of the change in risk. Non-disclosure of this fact constituted a breach of the policy. Of the cases cited by Mr. Euler some are no longer relevant due to changes in law and others were not applicable.
Economical has no duty to defend Mr. Euler against the claims made.