Updating your insurance contract

Many Canadians read their insurance policy in its entirety only after an accident, damage or loss, to determine whether they have coverage for the damage sustained. In some instances, policyholders may be dismayed to discover that their coverage does not extend to the type of damage that was incurred, they delayed too long in making a claim and/or they failed to fulfill one or more requirements in their policy.

One of the most common mistakes is a failure to report changes to details in your policy. An insurance policy is your contract with the insurance company; if your personal information or other minutiae pertinent to the policy changed but were not reported to your insurer, your insurance company may void your policy and deny coverage.

The importance of keeping your insurer abreast of personal details, such as an address change or a new driver in the home, cannot be overstated as the impact of a withdrawal in coverage can place an enormous financial burden on a family or business, in the event of a serious accident.

In Ontario, compensation for losses due to an automobile accident is governed by regulated accident benefits, and tort law (negligence). The Ontario government has stipulated the rights and obligations of insured persons as well as insurance companies.

Under law, mandatory insurance coverages include liability, accident benefits, direct compensation for property damage and uninsured automobile. Policyholders may also request optional coverages such as increased liability, collision and comprehensive coverage.

Termed 'no-fault benefits' under the Ontario Insurance Act, injured individuals are entitled to receive some compensation for monetary losses resulting from an accident regardless of whom is at fault. These accident benefits include medical and rehabilitation costs, income replacement benefits, housekeeping benefits and attendant care.

Injured individuals must submit an Application for Accident Benefits as soon as possible to their insurer following an accident. If another individual was at fault or negligent with respect to a collision, the injured person has the option of suing the 'at fault' person for damages. This action is also referred to as 'tort action', and injured individuals may sue for economic losses (pecuniary damages) and pain and suffering (non-pecuniary damages).

An injured person must have endured permanent and serious impairment of an important physical or mental function or permanent and serious disfigurement, in order to receive damages for pain and suffering. Ontario insurance law is complicated. A personal injury lawyer plays a critical role in guiding individuals successfully through the insurance claims process, and also in initiating tort action at the ideal time when medical evidence has been well documented to indicate permanent and serious damage.

Case example

In a recent action, Aviva Canada Inc. applied for a declaration that it had no duty to compensate Gravenhurst Taxi Ltd or the owner/operator, Kjell Iversen, in a lawsuit for damages resulting from an accident by one of Iversen's drivers.

The driver was involved in a single car collision resulting in serious injuries to his passenger. Aviva asserted that Gravenhurst Taxi Ltd was in breach of their contract (statutory condition 1.4 of the policy) with Aviva because the taxi company had not advised Aviva of the new driver. Aviva further declared that this breach was material because they would not have agreed to underwrite the driver who was at fault.

At trial, Iversen argued that Aviva had a history of accepting his driver changes at policy renewal time rather than at mid-term or at each occurrence of a change in drivers. Aviva's failure to take issue with Iversen's method of reporting driver changes indicated that they condoned this approach. Therefore, Iverson asserted that his breach was one of imperfect compliance as opposed to non-compliance.

In making his decision, Justice Wood relied on Kozel v. Personal Insurance Co. to consider this case based on two constructs. The first determination considered whether there was imperfect compliance with a policy term or non-compliance with a condition precedent. If the former, release against forfeiture was available to Iversen.

The second determination cited Saskatchewan River Bungalows Ltd. v. Maritime Life Insurance Company with respect to three conditions for granting relief from forfeiture that were set out by the Supreme Court of Canada:

1. the conduct of the applicant;
2. the gravity of the breach; and
3. the disparity between the damage caused by the breach and the value of the damages.

In consideration of the conditions set above, Justice Wood noted that in the five years that Iversen had a policy with Aviva, he was very conscientious with regards to paying on time and readily supplying any information requested by Aviva. In fact, it was submitted that Iversen was, if anything, fastidious about his insurance policy. Although his policy coverage did not require him to report a new taxi purchase, Iversen reported every new vehicle to ensure that they were covered. Iversen had been reporting employee (driver) changes to his broker when requested, usually a few months before renewal, and stated that he was never asked to report them when they occurred. 

Justice Wood ruled that the three conditions identified in Saskatchewan River Bungalows Lt v. Maritime Life favoured Gravenhurst Taxi Ltd and Kjell Iversen. In consequence, Aviva was ordered to defend and insure Gravenhurst Taxi and Iversen in a lawsuit initiated by the injured passenger.

In this case, although Iversen had not immediately reported each change in driver information, his history in dealing with Aviva consistently showed the insurer's acceptance of annual reporting of such changes. That fact that Iversen had proved to be a contentious client with no intent to misrepresent information also had bearing on this case.

For insurance companies, a 'material change to risk' is the most likely condition to void your policy. This means that there was a change in the policyholder's circumstances, for a person or a business, that represents a significant change in "risk to the insurer." 

Aviva may have argued that the driving record of the driver who caused the collision and the damages leading to this trial, if known to them, would have changed the particulars of Gravenhurst Taxi's policy (perhaps by requiring higher premiums). Therefore, the policy on the day of the accident was void because it had not been updated by Iversen to reflect current information and risk criteria.

Iversen was fortunate, in this case, "that his exemplary record and history of dealing with his insurer did not result in voiding of his contract." Had this occurred, the costs to Iversen would be staggering as the injured passenger would have the right to sue his uninsured business.