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Insurer ordered to pay accident benefits even though policy expired before accident


January 8, 2009   by Canadian Underwriter


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The Ontario Superior Court of Justice has upheld the principle that an insurer cannot simply deny paying accident benefits to an applicant — even if the policy had been cancelled two months before the accident — so long as there is some kind of connection between the applicant and the insurer.
In Lombard Canada Limited v. Royal & SunAlliance, the connection or “nexus” was none other than the applicant first applied to Lombard for the receipt of accident benefits.
Eric Shapwaykeesic was injured in a motor vehicle accident in October 2002 while operating a vehicle owned by Paul Achneepineskum.
Lombard cancelled the insurance policy on the vehicle in August 2002, about two months prior to the accident.
Nevertheless, Shapwaykeesic submitted an application to Lombard for accident benefits in January 2003, since police identified Lombard as the insurer.
In a letter dated Jan. 10, 2003, Lombard advised Shapwaykeesic’s counsel that the insurance policy was not in force at the time of the accident and therefore it was not responsible for paying him accident benefits.
Much later on, in October 2003, Lombard learned that Shapwaykeesic was listed under a policy issued to his employer by Royal.
Lombard immediately gave Royal written notice that it intended to dispute its status as the priority insurer, but its notice to Royal came well after the statutory 90-day notice period. (Lombard noted that Shapwaykeesic incorrectly identified in a form that he had no form of insurance; hence the delay.)
In finding that Lombard was responsible for paying accident benefits to Shapwaykeesic, the arbitrator noted Shapwaykeesic did not receive any benefits for 15 months while the priority issue was being resolved. This was in direct contradiction with the intent of Ontario’s accident benefits legislation, the arbitrator noted.
The legislation, Ontario Superior Court Justice G.R. Strathy noted, establishes a “nexus” test, so that as long as some kind of connection exists between the claimant and the insurer, the insurer must pay benefits first and resolve the dispute priority through the 90-day notice provisions later.
“The statutory scheme of ‘pay first, arbitrate later if necessary’ would be frustrated if an insurer could dispute its liability at the outset, no matter how well-founded its dispute may ultimately prove to be,” Strathy wrote.


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