McNaughton v. Co-operators could spawn class action landslide

The victory of one policyholder in a case involving auto insurance deductibles could give rise to large numbers of Canadians seeking similar action against insurers. A Supreme Court of Canada ruling yesterday denies Co-operators General the right to appeal a lower court judgement forcing the insurer to return the deductible on a vehicle destroyed in a car crash. Although that decision alone means the company will have to pay an Ontario man, Gary McNaughton, $1,000, insurers fear the decision will cause an onslaught of similar cases now.
The case involved McNaughton Automotive, which owned a fleet of vehicles insured by a commercial policy, one of which was damaged in a collision. Co-operators paid McNaughton $8,100 minus a $1,000 deductible, took the vehicle and sold it off for $1,900. McNaughton filed a class action lawsuit on behalf of all Co-operators auto policyholders in Ontario, Alberta and the Maritimes.
The Ontario Court of Appeal had ruled that the insurer should have waived the deductible in light of having sold the vehicle. This decision would apply only to Ontario cases. The Supreme Court’s decision not to hear an appeal means that policyholders going back years can join in similar suits to recapture their deductibles in similar situations.
“For some automobile insurers, particularly direct writers, if classes [for lawsuits] were successfully certified, the potential payout to the class in addition to lawyers fees could amount to millions of dollars,” writes lawyer Bill Blakeney in a recent edition of Canadian Underwriter, referring to the McNaughton case. He says that as a result of the Ontario decision “the property/casualty industry faces one of the largest potential class actions in history”.