No binding agreement to abandon priority or coverage dispute: Ontario Court of Appeal

The dispute involved two companies providing coverage

No binding agreement to abandon priority or coverage dispute: Ontario Court of Appeal

The Ontario Court of Appeal has settled a dispute between two automobile insurance companies, finding that the parties did not enter into a binding agreement to abandon their priority or coverage dispute.

The dispute in BelairDirect Insurance Company v. Continental Casualty Company 2023 ONCA 834 revolved around the third-party liability coverage for the driver or lessee of a leased vehicle, George Sarantakos, who was involved in a motor vehicle accident.

The dispute stemmed from the fact that Continental CasualtyCompany provided third-party liability coverage for the lessee or driver while BelairDirect Insurance Company did not. Despite this, Continental argued that Belair should be deemed the priority insurer under the Insurance Act. However, the Ontario Court of Appeal disagreed and upheld the application judge's decision.

Continental was the motor vehicle liability insurer for a car rental company, WTH Car Rental ULC. Continental offered WTH and its lessees coverage. The lessee, Sarantakos, was involved in a collision while driving a leased SUV in July 2015, leading to a $2,100,000 personal injury action against him and WTH.

The legal proceedings involved Continental's counsel, Belair's counsel, and the plaintiffs' counsel engaging in correspondence about dismissing claims against WTH. Belair erroneously advised Continental's counsel that Sarankatos was a named driver on a Belair policy.

The application judge made vital findings, including that Sarantakos was not insured under Belair's policy at the time of the accident, and Continental had a duty to defend him. The judge also ruled that Belair did not enter into a binding agreement with Continental to abandon any priority dispute.

On appeal, Continental did not contest that Sarantakos was not covered under Belair's policy at the time of the accident, that he was covered under Continental's policy issued to WITH, and that Belair initially undertook his defence based on the erroneous belief that Sarantakos was a named driver in its policy issued to his mother. Nonetheless, Continental focused on alleged errors by the application judge, which included the failure to find that Belair entered into a binding agreement with Continental to abandon any priority dispute concerning coverage.

The Ontario Court of Appeal rejected Continental's arguments, emphasizing that Belair did not enter into a binding agreement to abandon the priority or coverage dispute. The court highlighted the conditional nature of Belair's consent and the lack of indication that the insurers agreed to abandon any priority dispute concerning coverage.

Furthermore, the court said that given that Belair was mistaken in its initial belief that Sarantakos was insured under his mother's policy at the time of the accident, Continental cannot demonstrate that the requirements of waiver are satisfied as a waiver requires "full knowledge of rights" and "an unequivocal and conscious intention to abandon them. As a result, the court dismissed the appeal and awarded the costs of the appeal to Belair.

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