Canadian Underwriter

Court blames insurers for draining the public purse during coverage dispute

November 4, 2008   by Canadian Underwriter

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An Ontario Superior Court judge has issued a strong rebuke to the insurance industry for failing to resolve coverage disputes between insurers quickly, thereby causing a public fund to pay statutory benefits to victims during the time it takes to resolve the dispute.
Ontario Superior Court Justice Romain W.M. Pitt made his remarks in Lombard Canada v. Kent & Essex Mutual Insurance Company.
In Lombard v. Kent, Mark Dyer was injured in a motor vehicle accident on Nov. 9, 2003. The Ontario Motor Vehicle Accident Claims Fund, a “payer of last resort” in cases involving people with no insurance and which had no ultimate exposure in this instance paid accident benefits to Dyer while Lombard and Kent & Essex each disputed responsibility for the claim.
“In this case, as an example, over [Cdn]$1 million have been paid out of the public coffers in an attempt by the Fund to provide relief and prevent hardship to a severely injured victim,” Pitt wrote. “Since at least October 2004, K&E and Lombard were either aware or ought to have been aware of the accident and the Fund’s stop-gap intervention.
“The failure of both companies to act on their obvious knowledge that the Fund has no ultimate exposure has serious implications for the administration of the public finances of the province. It is a circumstance that obtains all too often, and for which insurers must be held to account.”
Pitt ordered that each insurer was jointly responsible to reimburse the Fund for all moneys paid to Dyer.
Lombard had argued in the case that Kent & Essex should be on the hook for the claim, because Kent & Essex had failed to terminate Dyer’s insurance policy, having mailed the cancellation to the wrong address.
Lombard was responsible for paying the claim in the event that Kent & Essex was found to have terminated the insurance policy.