The Ontario Superior Court of Justice has upheld the principle that an insurer cannot simply deny paying accident benefits to an applicant as long as there is some kind of connection (or nexus) between the two. This applies even if the policy had been cancelled prior to the accident in question.
The case involved Lombard Canada Limited v. Royal & SunAlliance in which the tenuous connection was the fact that the applicant had first applied to the insurer to receive accident benefits.
One Eric Shapwaykeesic was injured in a motor vehicle accident in October 2002 while driving a vehicle owned by another party. Lombard had cancelled the vehicle insurance policy two months before the accident. Nevertheless, the injured party applied to Lombard for accident benefits in January 2003 after police identified Lombard as the insurer.
Lombard then advised Shapwaykeesic’s counsel that the insurance policy wasn’t in force when the accident occurred so they were not responsible. Later that year Lombard learned that the injured claimant was listed under a Royal policy issued to his employer.
Lombard immediately gave Royal written notice of its intention to dispute its status as priority insurer. However, that notice occurred well after the statutory 90-day notice period, a delay that occurred because Shapwaykeesic had informed Lombard that he had no form of insurance.
The court held that Lombard was responsible for paying accident benefits. The case arbitrator noted that the claimant received no benefits for 15 months while the priority issue was under dispute. And this directly contradicted the intent of Ontario’s accident benefits legislation. The Ontario Superior Court Justice said that the legislation establishes a nexus test so that when there is some kind of connection between the claimant and the insurer, the insurer (Lombard) must pay benefits first. If there is a dispute priority, the insurer must resolve it later, through the 90-day notice provisions. He noted that “The statutory scheme of ‘pay first, arbitrate later if necessary’ would be frustrated if an insurer could dispute its liability at the outset, no matter how well-founded its dispute may ultimately prove to be.”