C.A. Says Relief from Forfeiture only Available for Post-loss Events

In Williams v. York Fire & Casualty Insurance Company, released today by the Court of Appeal, the court was dealing with a fact situation that often comes up. A driver was involved in an accident. When the accident occurred, the driver’s licence was under suspension. However, he claimed that he had been unaware of this fact and sought relief from forfeiture of his auto insurance coverage.

The driver in this case was involved in an accident in British Columbia. He had formerly lived in Ontario, where he had a number of unpaid speeding tickets, which had resulted in his licence being suspended just hours before he was involved in an accident in British Columbia. He claimed not to have known this (and that contention was not in issue on the appeal).

His insurer denied coverage on the basis that the insured was in breach of statutory condition 4: “The insured shall not drive or operate or permit any other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it.” The insured sought relief from forfeiture under s. 129 of the Insurance Act, which reads as follows:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

The insurer argued (as have others before it), that by its language, s. 129 applies only to “post-loss aspects of non-compliance”. Since the breach by the insured preceded the loss, contended York Fire, s. 129 does not apply.

The insured relied on a case that has often been cited in this type of case: Quarrie v. State Farm Mutual Automobile Insurance Co. (1997), 32 O.R. (3d) 421 (Gen. Div.). In that case, the insured’s licence had been suspended only four hours before the loss and he was not aware of it. The court in that case granted relief from forfeiture.

In the present case too, the motions judge had accepted the insured’s argument and granted relief from forfeiture. However, the Court of Appeal allowed the appeal. It overruled Quarrie and took a much more restrictive view of a court’s power under s. 129:

It is clear from Falk, as Madam Justice McLachlin stated, that “it is only in respect of such statutory conditions as to proof of loss or other matters or things that are required to be done or omitted with respect to the loss that the court has this power.” [Emphasis added by the court.]

The court’s power under s. 129 is only in relation to things or matters required to be done, in relation to the loss, that is, after a loss has occurred. The discretion a court has under s. 129 is a narrow one pertaining only to those policy conditions – statutory or contractual – that relate to proof of loss. It does not apply generally to all policy conditions.

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