In Abdulraheem v. Belair Direct (2025 SC 41850), the Hamilton Small Claims Court ruled against claims by self-represented plaintiffs that the defendant insurer had failed to abide by the terms of the automobile insurance policy.
The Facts
In May 2024, the plaintiffs’ 2017 Ford Fusion was involved in a rear-ended fender bender. The plaintiffs were not at fault, and their vehicle was taken to a repair shop where the repair costs were estimated at around $2500. The vehicle was covered by an automobile insurance policy issued by the defendant insurer.
After the damages were assessed, the plaintiffs and defendant discussed the cost of repairs. The plaintiffs took the position that the defendant should “write off” the vehicle and provide them with the full replacement value of the vehicle. The plaintiffs claimed in the alternative that the accident caused damage to the car’s transmission, engine, and steering column, and the defendant should repair these parts in addition to the repairs provided for in the repairer’s estimate, should they choose to not pay the replacement value of the vehicle. The plaintiffs further insisted that any replacement parts used should be genuine Ford parts instead of after-market parts.
The defendant insurer took the position that it was entitled to decide whether to repair or replace the vehicle. Since the cost of repairs was significantly below the replacement value, the defendant did not accept the plaintiffs’ initial position. The defendant argued that the damage to the transmission, engine, and steering column was not caused by the fender bender, and as such, was outside the scope of coverage. The defendant also advised the plaintiffs that the choice of which replacement parts to use was that of the defendant insurer alone, and that any additional costs for original parts would have to be borne by the plaintiffs.
The Second Incident
Shortly after the repairs for the accident were completed and the plaintiffs retrieved their vehicle, it stalled, causing much concern and distress for the plaintiffs. The vehicle was sent to a repair shop where it was determined that rodents had chewed through wires in the steering column while the vehicle was being repaired. The plaintiffs submitted a second claim for damage to the defendant. The defendant agreed to cover the costs of replacing the wires in the steering column, but the plaintiffs again disputed this, requesting instead that either the entire steering column be replaced, or the entire vehicle be written off with the plaintiffs receiving the full replacement value of the vehicle. However, the plaintiffs eventually acceded to the repairs authorized by the defendant.
The Third Incident
After the repairs were completed and the vehicle was waiting to be picked up, yet another unfortunate incident occurred: the vehicle was vandalized by an unknown person. The vandal cut wiring under the dash, and there was no available evidence to determine the culprit’s identity. The plaintiffs again demanded that the car be written off, and the defendant responded that the vandalism must be submitted as a third claim, separate from the accident and subsequent rodent damages.
Before the Court
The dispute between the parties escalated and the plaintiffs sued the defendant for damages. The issue at trial was whether the defendant insurer breached its obligations under the automobile policy of insurance through which it provided coverage for the plaintiffs’ vehicle.
Replacement or Repair?
The facts above make it clear that the plaintiffs believed that they were entitled to choose whether the defendant insurer would repair their vehicle or pay the plaintiffs a sum equivalent to the actual cash value of the vehicle at the time of loss. However, the Ontario Automobile Policy (OAP 1) created under the Insurance Act provides clear guidance on this point. Subsection 7.7 of OAP 1 states that the insurer will pay the lower of 1) the cost to repair the vehicle minus the deductible, and 2) the actual cash value of the vehicle at the time it was damaged or stolen (again, minus the deductible). As such, the court held that the insurer was entitled to decide which payment option to pursue.
Loss Events versus Wear-and-Tear
The plaintiffs led evidence to suggest that the damage to the steering wheel was caused by the accident. However, upon cross-examination, it quickly became clear that the damage to the steering rack could not be attributed to any of the loss events forming part of the plaintiffs’ claim. Under subsection 7.2 of the OAP 1, the insurer will only cover damage caused by a loss event such as an accident, fire, theft, or vandalism; damage caused by wear and tear is expressly included in the list of non-covered losses.
The court accepted the defendant’s theory and witness evidence that the damage to the steering rack was caused by general wear-and-tear. It differentiated between damage that arises due to a “loss event” versus damage that arises because of general wear-and-tear, and held that the insurer is only obligated to cover damage that arises as a result of a loss event.
Condition of the Replacement Parts
The plaintiffs also argued that the insurer must use original Ford parts rather than after-market parts. Again, ruling in favor of the insurer, the court held that, per subsection 8(6) of the OAP 1, the decision is that of the insurer. This provision stipulates that the replacement parts used must be of “like kind and quality” to the parts damaged or lost. However, there is no obligation to replace the parts with the kind provided by the vehicle manufacturer.
Conclusion
The OAP 1 serves a crucial purpose: it ensures uniform access for motor vehicle owners in Ontario to certain minimum insurance benefits in the event of loss or damage to their vehicle. Further, it sets out the rights and obligations of both insured persons and insurance providers. To make sure that the legal entitlements of all parties are protected, it is crucial that parties read and fully understand the terms of the OAP 1.
Branson Wong represented the defendant insurer in this case. If you have any questions about this decision or obligations or entitlements under an automobile insurance contract, please contact Branson at [email protected].
Daniel Hinds is an articling student at ZTGH and the author of this blog. If you have any questions about this blog, please contact Daniel by email at [email protected].
