Insurers Bear the Burden of Non-Compliance with Non-Renewal Notice Requirements

Echelon General Insurance Co. v. Ontario (Minister of Finance), 2016 ONSC 5019.  The insured purchased a six month automobile insurance policy in December 2008.  Just ten days later Echelon purported to cancel the policy due to non-payment of premiums.  The notice was not valid in accordance with the Insurance Act (“Act”).  In May 2010 the insured was involved in a motor vehicle accident and the issue was whether the insurance had lapsed or expired prior to the accident.  The question was first determined by an arbitrator who found the insurance policy had expired.  The decision was then appealed to the Ontario Superior Court and the appeal was granted.

For the purposes of the decision all parties agreed that the notice to cancel the insurance was improper and therefore invalid.  The question before the arbitrator and then Court was; does section 236 of the Insurance Act mean that an insurance policy will remain in force even after its terms should expire if the Insurer fails to comply with the notice provisions?

Section 236(5) states that “a contract of insurance is in force until there is compliance with” the s.236 notice provisions.  The arbitrator found that insurance policy had expired at the end of the six-month term.  In her decision she stated that the intent of the Act was not to extend coverage into perpetuity, with no offer and acceptance or premiums being paid.

In the appeal by the Minister of Finance, the Court found that the arbitrator had erred in law as the Act clearly intended to place the burden of non-compliance with notice requirements on Insurers.  It is not sufficient to rely on the term of the policy to avoid the mandatory obligation of insurers to give certain notices.  The arbitrator was also not correct that the Act allowed for coverage to be extended into perpetuity without payment of premiums.  The Act only extends coverage until the insurer complies with the Act and provides the required notice.  The Insurer is also entitled to recover premiums for any period in which insurance is provided.

The Court stated that section 236 unambiguously places the risk of non-compliance with the Act on Insurance companies and this is completely consistent with the objectives of a compulsory insurance regime.  The appeal was granted.

What the Insurer Should Know

Where a policy has been improperly cancelled, it may continue in force until such time as the cancellation has been carried out according to the Insurance Act.

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Mitch Kitagawa Chantel Helwer, Articling Student