The motion decision of Gagnon v. Simvasamboo, 2021 ONSC 3853, released by Justice James McNamara on May 27, 2021, addresses the issue of whether a Plaintiff can claim declaratory relief against a Defendant’s insurer in litigation stemming from a motor vehicle accident.
This actions stems from a motor vehicle accident that occurred on March 21, 2017, where the Plaintiff alleged he was injured as a result of the negligence of the Defendant, Sivasamboo.
Mr. Sivasamboo’s insurer, L’Unique General Insurance Inc. (“L’Unique”), also a Defendant in the action, denied coverage based on material misrepresentation which they allege made their policy void ab initio.
The Plaintiff also claimed against his own insurer, Co-Operators General Insurance Company, in its capacity as the uninsured/underinsured carrier, whose policy may provide payment where the Defendant’s vehicle was uninsured or inadequately insured at the time of the accident.
On August 11, 2020, an Amended Statement of Claim was served by the Plaintiff, where it claimed declaratory relief in stating that L’Unique’s policy was a valid and enforceable automobile policy of insurance on the date of the accident. The Plaintiff’s amendments also included further declaratory relief, alleging that L’Unique was the insurer of Mr. Sivasamboo, pursuant to a policy of automobile insurance and that L’Unique had failed to properly respond to the claim and defend it on behalf of Mr. Sivasamboo.
L’Unique brought two motions before the court.
On the first motion, L’Unique sought an order to be added as a Statutory Third Party under section 258(14) of the Insurance Act, R.S.O. 1990, c. I. 8. The court granted this motion in accordance with section 258(14) which provides that, where an insurer denied liability under a motor vehicle policy, it shall, upon application to the court, be made a third party in any action to which the insured is a party.
On the second motion, L’Unique sought to strike certain paragraphs of the Plaintiff’s Amended Statement of Claim seeking the declaratory relief noted above.
L’Unique stated that claims for declaratory relief have two prerequisites conditions:
- There must be a real issue between the parties, and such a right must be, or is threatened to be, infringed by the Defendant’s acts or omissions; and
- The Plaintiff must have standing, that is, the Plaintiff must have a judicially recognized right.
L’Unique argued that at that stage in the litigation, there was no real issue between the Plaintiff and L’Unique, in that there was no privity of contract. Given this proposition, L’Unique submitted that the Plaintiff had no right, at that time, to raise an issue pertaining to enforceability of the L’Unique’s contract of insurance with the Defendant, Sivasamboo.
L’Unique further stated that it is required under section 258(15) to defend its insured in the litigation and provide, if necessary, payment up to the statutory limits of $200,000. With that said, L’Unique conceded that if the Plaintiff were to recover a judgment for more than the statutory limits of $200,000, then the Plaintiff could maintain an action against the insurer pursuant to section 258(1) of the Insurance Act, and if it was determined there was coverage, to have those insurance proceeds applied towards those damages to the extent of the policy limits.
In response, the Plaintiff relied on S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4 in stating that declaratory relief can be granted by the courts on a discretionary basis, and that relief of this nature is appropriate where:
- The court has jurisdiction to hear the issue;
- The dispute is real and not theoretical;
- The party raising the issue has a genuine interest in its resolution; and
- The responding party has an interest in opposing the declaration being sought.
L’Unique’s motion to strike the paragraphs claiming declaratory relief in the Plaintiff’s Amended Statement of Claim was dismissed. In his reasoning, Justice McNamara relied on the decision of William v. Pintar, 2014 ONSC 1606, which dealt with many of the same issues as the present case. In William, the Plaintiff moved to amend the Statement of Claim to add Jevco Insurance as a Defendant, seeking declaratory relief related to coverage. Jevco denied coverage to the Defendant, Pintar, and added themselves as a Statutory Third Party. Similarly to L’Unique in the present case, Jevco argued that there was no relationship, contractual or otherwise, between itself and the Plaintiff and therefore no cause of action existed against them. Further, Jevco argued that section 258(1) of the Insurance Act requires that there be a judgment against the Defendant before the Plaintiff has a potential cause of action against the insurer for reimbursement over the statutory minimum limits.
The Plaintiff in William argued that to add Jevco in order to claim declaratory relief, a cause of action is not required as long as the person seeking the declaration and the person opposing it have a true interest. The court sided with the Plaintiff, and held that the absence of a direct cause of action was not dispositive, and that the draft Amended Statement of Claim disclosed a tenable claim in the form of declaratory relief between interested persons sufficient for such amendments to be allowed. The court in William also accepted that judges have broad discretion to make declaratory orders, especially in circumstances that pose the question of whether a Defendant driver had a valid and enforceable policy of insurance so that should the judgment for damages exceed the statutory minimum limits, there may be funds available to satisfy those damages.
In the present case, Justice McNamara agreed with the court’s conclusion in William, in particular, the court’s comments with respect to Section 258(1) where Master Roger, as he then was, stated:
“Section 258(1) is not exclusive. It provides how a plaintiff may, upon receiving judgment, proceed against the insurer of the Defendant for payment of available insurance money. It does not provide that a Plaintiff may only proceed as provided therein and does not prevent a plaintiff from seeking declaratory relief.”
Justice McNamara also referenced section 138 of the Courts of Justice Act, in stating that a multiplicity of proceedings should be avoided. Moreover, that the issue of coverage can be determined by the trial judge as part of the trial as a whole, by way of preliminary motion, or as the court may otherwise direct. The court went on to state that all four litigants in the case have a real interest in having this coverage issue determined.
The decision in Gagnon reaffirms that courts will likely be tolerant of a Plaintiff maintaining an action against a Defendant’s insurer for declaratory relief regarding the applicability of the insurance policy responding to the claim, despite there being no cause of action or privity of contract between the Plaintiff and Defendant’s insurer. Defendant insurer’s should be cognizant that the courts have broad discretion to make declaratory orders. As such, motions to strike declaratory paragraphs in a Plaintiff’s Statement of Claim may not be successful with respect to the applicability of a Defendant’s insurance policy in response to a claim as a result of a motor vehicle accident.
Paul Irish is a member of the Licence Appeal Tribunal (LAT),Examination Under Oath (EUO),Coverage and Property practice groups, and is the author of this blog. If you have a question about this decision or a similar file, please contact Paul at 416.777.5224