Ont. Superior Court overturns default judgment, finds arguable defence in a vehicle collision case

Defendant acted promptly despite some difficulties with procedural filings: court

Ont. Superior Court overturns default judgment, finds arguable defence in a vehicle collision case

The Ontario Superior Court of Justice overturned a default judgment against the defendant, who had been sued by an insurance company, finding that he had an arguable defence due to his good-standing insurance policy and the insurer's questionable denial of coverage.

In Gore Mutual Insurance v. Abdulkadir, 2024 ONSC 2142, the court set aside a default judgment against Issa Mohammed Abdulkadir, who had been sued by Gore Mutual Insurance Company. The case stemmed from a rear-end collision involving Abdulkadir's vehicle, which his friend Ahmed Ahmed was driving with his permission.

Abdulkadir, who was insured by Gore Mutual at the time of the accident, had initially reported the incident to the insurer. However, Gore Mutual later denied coverage, citing Abdulkadir's alleged failure to cooperate with their investigation. Despite numerous calls and emails to Abdulkadir over several years, Gore Mutual claimed he did not respond or assist in defending the lawsuit filed by the other driver, Alsop.

After settling the Alsop lawsuit for $125,000 and obtaining an assignment of Alsop's rights, Gore Mutual pursued Abdulkadir for reimbursement. In February 2023, it obtained a default judgment against him for the settlement amount and $29,660 in legal costs. When enforcement efforts affected Abdulkadir's driver's license, he filed a motion to set aside the judgment.

The Superior Court examined the factors established in case law to determine whether to grant Abdulkadir's request. It found he brought the motion promptly after learning of the default judgment and acted quickly despite some difficulties with procedural filings. The court also acknowledged Abdulkadir's claim that he did not fully understand the communications he received.

The court found that Abdulkadir may have an arguable defence to Gore Mutual's denial of coverage or a valid claim for relief from forfeiture. Since the insurance policy was in good standing at the time of the accident, and given Ahmed Ahmed's testimony confirming he drove with Abdulkadir's consent, the court highlighted that participation in the litigation was a statutory condition.

Further, the court noted that s. 258 of the Insurance Act requires that an insurer make payments due to a judgment obtained against the insured. Since no judgment was obtained against Gore Mutual, Abdulkadir might argue that the insurer should not rely on this section to seek reimbursement.

Given the potential prejudice Abdulkadir would face in repaying a significant sum of money compared to Gore Mutual's completed settlement with Alsop, the court ruled that the default judgment should be set aside.

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