Lawyers often automatically seek substituted service when they cannot locate the defendant
The Ontario Superior Court has clarified the procedure for involving an automobile liability insurer when service cannot be effected on the defendant.
In Mullay v. Shaba, 2023 ONSC 2022, Sarah Mullay was involved in an automobile collision in 2020. She sought a court order for substituted service of the statement of claim on the defendant driver, Junsoon Shaba, by serving his automobile liability insurer.
The Ontario Superior Court of Justice noted that lawyers often automatically seek an order for substituted service on a defendant's motor vehicle liability insurer when they cannot serve the defendant at the address listed on the police report. However, the court emphasized that this is incorrect and clarified the procedure for involving the insurer in an order for substituted service on a defendant driver or an order dispensing with service.
No reasonable steps taken to locate the defendant
The court said that before an order for substituted service is issued, the plaintiff must take reasonable steps to locate the party to be served. When Mullay failed to serve the defendant at the address listed on the motor vehicle accident report, the court found that she asked the insurer for assistance. The insurer tried to contact the insured by telephone but was unsuccessful.
The court said in its decision, "The plaintiff must do more. She could have searched social media sites or done a Canada 411 search. She could have retained a skip tracer for a modest amount of money. None of this was done." The court then concluded that the plaintiff failed to take reasonable steps to locate the party to be served.
The insurer is not the insured's agent for service
The court pointed out that no provision under any relevant law makes the insurer the agent for the services of its insureds. The court emphasized that substituted service of an insured person by service on their insurer is an "anomaly." As a rule, it must not be allowed because it places the burden of finding the insured on the insurer. If the plaintiff cannot find the defendant and there is no way to inform them of the proceedings, the plaintiff should not effect service by sending a copy of the statement of claim to the defendant's insurer. Instead, service should be dispensed with.
The court further said that under the Insurance Act, the automobile liability insurer is the insured's irrevocable attorney to appear and defend an action against the insured arising out of the ownership, use, or operation of the automobile, even if the insured fails or does not wish to respond. However, the court pointed out that the insurer is the statutory agent for only that limited purpose and not the insured's agent for the service of an originating process.
The court clarified that it could only make an order that substituted service be effected on the defendant's insurer under the following conditions:
- The insurer agrees to accept service on behalf of its insured;
- There is evidence that the insurer has a current address for its insured and that by serving the insurer, the insured is likely to become aware of the claim against them; or
- The plaintiff undertakes not to strike out the defence if the insurer cannot produce its insured person at Examinations for Discovery
The court explained that if the insurer is to be served on behalf of the insured, it must be in addition to another method of service, such as mailing it to the defendant's last address on record with the Ministry of Transportation or by publication in two editions of a newspaper in the locality where the defendant is known to reside or in a nationally circulated newspaper if the defendant is a Canadian resident.
The court emphasized that if the defendant's whereabouts are unknown, the proper disposition is to dispense with service of the statement of claim.
Furthermore, the court explained that if it decides to name the insurer in an order for substituted service, the order must provide that service is to be made on the insured person, and once served, the plaintiff must give the insurer a copy of the documents served and the order permitting substituted service. If the court dispenses with service on the defendant, the order should specify that the insurer must be served with a copy of the documents and the order dispensing with service. Proceeding this way will put the liability insurer on notice of the claim.
The court ultimately dismissed the plaintiff's motion, with leave to bring it back on after proper efforts had been made to locate the named defendant.