A failure to rely upon a defence in settling a statutory accident claim does not prohibit an insurer from relying on that defence in the tort claim.

Insurance law – Automobile insurance – Statutory Accident Benefits Schedule – Exclusions – Underinsured motorist – Uninsured motorist; Actions – Abuse of process – Practice – Settlement.

Wagner (Litigation guardian of) v. Fellows, [2017] O.J. No. 6329, 2017 ONSC 6979, Ontario Superior Court of Justice, December 5, 2017, A. Mullins J.

The Minister of Finance sought declaratory relief against the defendant’s insurer on behalf of the infant plaintiff. The Minister contended that it would be an abuse of process to allow the insurer to rely upon an exclusion that would result in the plaintiff being unable to receive certain benefits on the basis that he knew or ought to have known that the defendant was operating the automobile without the owner’s consent.

The insurer settled the statutory accident benefits claim. Terms of the settlement included that the insurer did not admit fault and noted that it would be required to maintain a firewall between the plaintiff’s statutory accident benefits claim and tort claim.  The insurer did not rely upon the defence that the plaintiff knew or ought to have known that the defendant was operating the automobile without the owner’s consent in this process.

On the basis that the insurer did not rely upon the defence for the statutory benefits, the Minister sought a declaration that it would be an abuse of process to allow the insurer to rely upon the defence for the tort claim. The court did not grant the declaration as the settlement was without prejudice and involved no admissions by the insurer.

This case was digested by Laura E. Miller, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter.  If you would like to discuss this case further, please contact Laura E. Miller at lmiller@harpergrey.com.