Canadian Underwriter

Insurer owes $234K in priority dispute when “named insured” is not the actual car owner

June 22, 2018   by David Gambrill

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Ontario’s Motor Vehicle Fund has recovered $234,574 in a priority dispute arising when GAN Canada Insurance (since acquired by Aviva Traders) sent a policy termination notice in 2001 to a named insured who was not the owner of the car involved in a fatal crash.

Ontario’s Court of Appeal upheld the finding of a lower court judge that the policy termination notice was incorrectly sent to the “named insured,” the vehicle owner’s wife (who arranged the policy), instead of her husband, under whose name the vehicle was registered.

As a result, the Appeal Court ruled, the auto insurance policy had not in fact been properly cancelled. With the policy still in force, Aviva Traders owed the settlement amount that the MVF paid out to a claimant.

Aviva Traders appealed the lower court ruling. The GAN Insurance representative maintained that he would have asked the wife during phone call who owned the vehicle; he would not have issued the policy had she replied ‘No.’

But the court found the notes of GAN’s representative did not indicate the question had been asked during the conversation. Moreover, no application for insurance had been submitted as mandated by the Insurance Act. The application form requires the name of the owner of the vehicle.

In Ontario (Finance) v. Traders General Insurance (Aviva Traders), released Thursday, John Leonard, the son of Anne and Peter Leonard, allowed his friend to drive his father’s 1991 Hyundai on Nov. 10, 2001.

Leonard’s friend, Mark Apollinaro, lost control of the car, killing the driver and catastrophically injuring another friend, Dragan Bogdanovic.

Bogdanovic did not have insurance coverage; the only way for him to recover accident benefits was through the insurance on the Hyundai or the MVF.

Aviva Traders did not defend the action on behalf of the vehicle owner, Peter Leonard, because it had cancelled the Hyundai owner’s policy for non-payment of premiums about a month before the crash.

The Fund settled with Bogdanovic for $234,574, and then sought to recover the funds from Aviva Traders, arguing that the insurer did not effectively terminate the policy, which therefore remained in force at the date of the accident.

Anne Leonard first purchased the automobile insurance from GAN Canada Insurance in 1999. “In the Leonard family, she was the one who dealt with financial matters, and, as a school bus driver, she could obtain a group rate on automobile insurance,” the court noted.

She contacted GAN by telephone and spoke with a representative who issued her an ‘owner’s policy’ for two vehicles. However, Anne Leonard’s husband, Peter Leonard, was actually the registered owner of the two insured vehicles.

When Aviva Traders could not withdraw premium amounts from Anne Leonard’s bank account in September 2001, it sent a notice of termination for failure to pay premiums by registered mail addressed to Anne Leonard.

“Anne Leonard did not tell her husband that the car insurance on his vehicles had been cancelled,” the court noted. “[Aviva Traders] later sent her a small refund of $12.94 by cheque dated October 10, 2011, which she cashed.”

Her son got into the accident a month later, prompting the dispute over whether the policy had been properly cancelled. The court found that the insurer should have sent the termination notice to the owner of the car, Peter Leonard, and not the named insured on the policy, Anne Leonard.