New Vehicle Coverage – A Warning to Insurers When New Vehicles Are Acquired
Jul 23, 2020
In the newly decided LAT case of J.J. v Jevco Insurance, 2020 CanLII 30393, the newly acquired vehicle provisions of the Ontario Automobile Policy Owner's Policy (“OAP 1”) was examined as it relates to a claim for accident benefits.
Coverage of newly acquired vehicles is automatically provided for 14 days as outlined in the Ontario Automobile Policy Owner's Policy (“OAP 1”), the language of such timelines being the crux of this dispute.
While the facts are somewhat in dispute, it was found that the insured, J.J., was interested in purchasing a motorcycle and contacted his broker for a quote. The insured was informed that Jevco does not insure motorcycles and based on J.J.’s poor driving record, he would need to seek coverage through the insurer of last resort, the Facility Association.
J.J. subsequently purchased a motorcycle on July 5, 2016, but did not provide its date of purchase, purchase price, VIN number or make and model of the motorcycle to Jevco.
J.J. was involved in a serious accident on July 11, 2016, despite being made aware that Jevco would not be providing coverage for the motorcycle. Section 2.2.1 of the OAP 1 allows that “…Your newly acquired automobile(s) will be insured as long as you inform us within 14 days from the time of delivery and pay any additional premium required.”
The preliminary issue centered on the interpretation of this provision and, based on the details of this accident, whether J.J. was covered for his newly acquired vehicle. Where J.J. did have coverage as an insured with Jevco, the real question was whether he would be excluded from receiving specified benefits including IRBs by reason of his knowingly operating of an uninsured vehicle.
In reaching his decision that J.J. was covered by Jevco at the time of the accident, Adjudicator D. Gregory Flude looks to earlier case law such as the decision of Hunter Estate v. Thompson, 2003 CanLII 23007 (ON CA).
Specifically citing the Hunter case, Adj. Flude noted “as on the current facts, the insured had paid the premium for coverage with Jevco, and this coverage includes the 14 days of automatic coverage for a newly acquired vehicle. Additional premium only comes into play for insurance beyond the 14 days”. This interpretation by Adj. Flude aligned with the Applicant’s argument that “in underwriting the original policy, the insurance company was aware of the 14-day newly acquired automobile provisions and factored that risk into their premium calculation”.
In turning to the OAP 1 itself, Adj. Flude found that “Section 2.2.1. speaks to newly acquired automobiles. It does not limit itself to like automobiles or automobiles intended for a similar use. Had that been the intention of the drafters of the policy, it would have been explicitly stated. The policy defines the coverage. Jevco must be understood to have known the risk it was covering and that a newly acquired vehicle might be a motorcycle, notwithstanding that it does not cover motorcycles. It must therefore be taken to have factored the risk of covering a motorcycle for a 14-day period into its premium calculations.”
Therefore, despite Jevco not insuring motorcycles and not being aware of J.J.’s recent purchase of one, the mere fact that J.J had an existing policy with premiums paid in conjunction with the OAP 1’s wording, Jevco accepted the risk of covering a new vehicle, albeit only for a 14 day window without binding additional coverage. Consequently, where the accident happens within that 14 day window, coverage must be provided.
It remains to be seen whether this interpretation is the correct one, as the decision is being appealed. Until then, Insurers must be aware of the risks associated with newly acquired vehicles, whether they choose to insure those vehicles or not.