In Winch v. Kedgh, a case that will be of interest to automobile insurers, Mr. Justice Paul Perell of the Ontario Superior Court has ruled that an injured claimant had no recourse against a tortfeasor’s liability insurance policy, despite the “absolute liability” provisions of s. 258(4) and (5) of the Insurance Act, because of an exclusion in the policy. His Honour held that the absolute liability sections “take away some defences to a claim by a third party beneficiary that would be available to the insurer to defend a claim for indemnity by the insured. They do not take away all defences”.
Here, the tortfeasor’s insurer, Royal & SunAlliance, had denied coverage to its insured. It relied on an exclusion in its policy, according to which there was no coverage for vehicles having a manufacturer’s gross weight rating of more than 4,500 kilograms. The vehicle that was involved in the accident was a cube van that the insured was driving, but it was not the passenger automobile described in the policy. (The contract of insurance did extend coverage for automobiles other than the described one, but subject to certain restrictions, including the weight limitation referred to above.)
Justice Perell likened this situation to one in which a vehicle is being operated without consent. In such circumstances, there would be no “indemnity” provided by the contract of insurance and thus, no absolute liability under s. 258(4).
On the other hand, if the policy had been entered into on the basis of a misrepresentation, that would not have enabled the insurer to avoid absolute liability.
Justice Perell conceded that the distinction was a “subtle” one. But he summarized his view of the Insurance Act’s absolute liability provisions as follows:
“There can be no recovery by a third party beneficiary under the scheme established by the Insurance Act, unless the insured could have been entitled to an indemnity under the insurance policy….[T]he provisions of the Insurance Act that make an insurer absolutely liable…apply only after the possibility of indemnity to the insured has been established.”