Canadian Underwriter

How a court kept insurers’ auto storage costs under control

April 25, 2018   by David Gambrill

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An auto collision centre has lost an appeal in court that would have effectively forced insurance companies to settle all disputes in an auto claim before the vehicle is released to the insurer, thus racking up storage costs while the claim remained unresolved.

“There will be many occasions where issues will arise between an insured and an insurer under an automobile insurance policy,” the Ontario Court of Appeal ruled Tuesday in 2237446 Ontario Inc. (409 Collision Centre) v. Intact Insurance. “It would not be to the benefit of either the insured or the insurer to have charges relating to the storage of motor vehicles involved in accidents mount up while those issues are resolved.”

Bonnie Brennan’s vehicle was involved in an accident in December 2015 and was towed to the storage premises operated by 409 Collision Centre. Just over two weeks later, Brennan signed off on a repair agreement in which she agreed to pay a storage rate of $85 per day.

One day before Brennan signed the agreement, Intact Insurance advised Brennan that it would pay the actual cash value of the vehicle, rather than pay for the cost to repair it. Brennan agreed with Intact that she would authorize 409 Collision Centre to release the vehicle to Intact. Under her automobile insurance policy, Intact was obliged to reimburse Brennan for the storage costs.

Intact and 409 Collision Centre could not agree on the storage charges that were properly due. So Intact applied for and received an initial certificate under the RSLA, under which 409 Collision Centre was obliged to release the vehicle to Intact within three days of receiving the certificate. The certificate was issued on Feb. 9, 2016, at which time Intact had not yet paid Brennan for the loss of her automobile.

Instead of filing a notice of objection with the court over the certificate, 409 Collision Centre applied to the court to have the initial certificate declared null and void. Since Intact had not paid Brennan for the value of the vehicle, the collision centre argued, Intact was neither the owner of the vehicle nor was it “any other person entitled to” the vehicle under s. 24(1) of the RSLA.  Hence, Intact was not entitled to obtain the initial certificate.

The application judge disagreed, finding that Intact had “assumed liability” under the contract of insurance and was then subrogated to the rights of its insured under s. 278 of the Insurance Act.

The Court of Appeal upheld the decision of the applications judge, finding that the collision centre’s position is “not one that reflects the realities of the marketplace.”

“It is obvious that the intent of the RSLA [Repair and Storage Liens Act] is to provide an expeditious procedure for dealing with disputes over storage charges, that protects both the storage holder and the owner of the item stored,” the Appeal Court found.

“The interpretation that [409 Collision Centre] argues for would effectively require insurers to settle all matters arising out of a motor vehicle accident with its insured, and make the resulting payment, before it would be able to avail itself of the remedies under the RSLA. In the interim, storage charges would continue to accumulate.  That interpretation is not one that is harmonious with the [objective] of the RSLA.”