Canadian Underwriter

“McNaughton” suits start to hit insurance industry

March 19, 2002   by Canadian Underwriter

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In the wake of the Supreme Court of Canada’s decision not to allow an appeal in the case of McNaughton v. The Co-operators General Insurance Company of Canada, similar suits are now being launched in Ontario and Alberta. The case, which involves insurance companies charging a deductible on cars written off following collisions and then sold by the insurer for salvage, was a class action suit that could potentially involve two million Canadians in six provinces and all three territories who have written off vehicles in the last decade. Refunds for deductibles rage from $250 to $50,000, adds a press release from law firms Koskie Minsky of Toronto, McNally Cuming Allchurch of Calgary, and Klein Lyons in both Vancouver and Toronto). Another firm, McGowan Elliott & Kim of Toronto, says it is currently representing clients suing Co-operators and more than a dozen other insurers, and is joining other Ontario firms in suits against CGU, Royal & SunAlliance, State Farm, Axa, Allianz, Allstate, Zurich, Pilot, Security National, Primmum (formerly Canada Life Casualty), Citadel, CAA, York Fire & Casualty, Old Republic and Motors Insurance Company.
“The Supreme Court of Canada’s decision was a victory for drivers,” says plaintiffs lawyer Michael McGowan, who says insurers requiring motorists to pay a deductible and making money from the sale of totaled vehicles are “double dipping”. He adds that a decision by the Alberta courts in 1974 states basically the same idea as the Ontario decision: that the insurer can either take the wrecked car or charge the deductible, but not both.
Koskie Minsky offers a slightly different interpretation of the Ontario ruling, saying, “the court ruling state that people must be paid the actual cash value of their car, not the actual cash value less the deductible”.
Nonetheless, all firms involved agree that the overall hit to insurers could well be in the millions of dollars, despite the low value of the deductibles involved. “It doesn’t seem like a lot of money, but when you consider there are thousands of people involved, it amounts to a lot of money,” notes plaintiffs lawyer Bill McNally.
The law firm releases are also a means of informing drivers who may not realize they have a claim that the class action suit is being pursued, and it is likely that future suits will continue to arise against insurers.

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