Why a public insurer may have to cover the liability of a suspended car owner

In a priority dispute between insurers, Manitoba’s public auto insurer may be on the hook for the liability of the owner of a vehicle involved in a crash in Ontario, even though MPI had cancelled the car owner’s insurance certificate before the collision occurred.

Still, Manitoba Public Insurance (MPI) may not have to provide coverage to the vehicle owner, because the court has not yet determined if the action is statute-barred.

The case concerned a Manitoba vehicle owner, Dmytro Lavrov, who had moved to Ontario but had not registered his vehicle with Ontario within 30 days of moving to the province, as required by Ontario law. During the process of moving to Ontario, Lavrov’s brother, Ruslan, was involved in a rear-ender in St. Catharines, Ont.

The injured victims launched a claim against their own insurer, The Guarantee Company of North America, because the Lavrovs were uninsured at the time of the accident on Oct. 17, 2008. MPI had cancelled Dmyto’s insurance certificate for non-payment of premiums just before the accident, on Oct. 4, 2008.

The Guarantee settled with the accident victim, and subsequently tried to recover its costs from MPI. The Guarantee noted that insurers across the country are bound by the terms of an interjurisdictional undertaking to provide at least basic policy limits of coverage, uninsured auto coverage, and statutory accident benefits when their insured vehicles are driving in Ontario.

Critical to the case in Harte v. Lavrov, the inter-jurisdictional undertaking in Canada does not allow an insurer to set up a defence to a claim that it could not advance in the same jurisdiction where the accident occurred.

“On the motion before me, MPI seeks to rely on s. 58 of the MPICA [Manitoba Public Insurance Corporation Act], which would permit MPI to deny insurance coverage by automatically revoking the owner’s certificate associated with the Lavrov vehicle based on Dmytro Lavrov’s failure to register his vehicle in Ontario within the required time,” Ontario Superior Court Justice Richard Lacoco wrote in a decision released Thursday. “There is no equivalent Ontario provision that automatically denies insurance coverage with respect to an Ontario vehicle being operated in a jurisdiction outside Ontario if the vehicle is not properly registered in that jurisdiction.

“The fact that Ontario (unlike Manitoba) does not have a system of public automobile insurance provides an explanation for the absence of an Ontario equivalent to s. 58 of the MPICA. However, in my view, that explanation does not provide a convincing basis for concluding that the [inter-jurisdictional] undertaking does not apply in these circumstances.”

In any event, the court went on to determine that MPI had failed to properly notify its driver of the insurance certificate cancellation. The court noted that under Manitoba law, notice to the driver of a license suspension and insurance cancellation must be done “without delay.”

“In order to suspend Dmytro Lavrov’s owner’s [insurance] certificate for failure to pay the required premium, MPI was required by s. 3.1(2) of the Automobile Insurance Coverage Regulation to give him written notice of his suspension ‘without delay after the suspension,’” The Ontario court found. “The evidence is clear that once the suspension was effective on Oct. 4, 2008, MPI did not provide him with written notice of the suspension prior to the date of the accident (October 17, 2008).”

Even if MPI had complied with Manitoba law in providing notice of cancellation, the inter-jurisdictional undertaking requires Manitoba’s public insurer to comply with Ontario’s cancellation notification procedures, which include a 30-day notification period (not the 14-day period in Manitoba], Lacoco found.