Why an auto insured didn’t have to help with his insurer’s defence

An Ontario court has set aside a judgement of almost $155,000 that an auto insurer obtained against its insured for not complying with a legal obligation to participate in the insurer’s defence.

In this case, the insured was not driving his car during the accident — his best friend was, with the insured’s permission. And so, since the insured was only vicariously liable for the crash, he had done enough by advising the insurer he was not the driver when the accident happened.

The insured provided his information at the outset of the litigation, before the insurer’s many failed attempts to reach him for three years following the collision, the court found. The insured’s friend, who was driving the car, did participate in defending the claim.

“[The] insurer [Gore Mutual Insurance Company] admits that the defendant’s policy was in good standing as of the date of the Alsop accident,” the Ontario Superior Court ruled in the decision released Friday.

“It is clear that participation in the litigation was a statutory condition of the defendant’s policy, but it is unclear how the defendant’s breach/non-participation, after he reported the accident and gave the information about the person who was driving, impacted the outcome of the Alsop litigation, given the vicarious liability.”

Issa Mohammed Abdulkadir was an insured in good standing with Gore on Sept. 12, 2016, when his vehicle was involved in a rear-end collision. The other driver of the car was named Alsop, according to court documents. Alsop sued Abdulkadir for damage caused by the crash.

Abdulkadir made an initial report of the accident to the insurer. He told Gore his best friend, Ahmed Ahmed, was driving the car at the time of the accident, with Abdulkadir’s permission.

Additionally, Abdulkadir spoke to Gore representatives about the incident on Feb. 20, 2018, and again on Apr. 10, 2018. The court said no details were provided about what other information the insured had given to Gore on these occasions.

Ahmed was added as a defendant in the Alsop litigation. He attended examinations for discovery and participated in the litigation, although he did not file any defence — he was found in default.

For three years, Gore tried to contact Abdulkadir regarding the case and received no answer at the email address Abdulkadir had given his insurer. A court chronology of the communications showed some contact via telephone about certain matters, yet poor or no follow-up on emails and phone messages. The court noted English is not Abdulkadir’s first language.

Related: Can’t find defendants in auto liability cases? Don’t serve their insurers instead.

In the court’s chronology, a Gore claims rep phoned Abdulkadir five times between April and July 2018. None of the calls were returned.

On Apr. 8, 2019, the insurer sent a registered letter to Abdulkadir at his last known address, advising it would not provide coverage due to Abdulkadir’s failure to assist in the defence.

A month later, Gore sent Abdulkadir an email copy of the insurer’s motion to be added as a statutory third party in the Alsop litigation. (This happens when an insurer has declined coverage to the policyholder, but is nevertheless defending the auto liability case.)

In aid of the insurer’s application for third-party status, the insurer’s counsel told Abdulkadir over the phone that he was required to attend the lawyer’s office and provide a statement about the accident. Abdulkadir did not show up.

Gore settled, sending Alsop $125,000. It obtained a judgement against Abdulkadir for the settlement money, in addition to almost $30,000 in legal fees.

In May 2023, Gore attempted to enforce the judgment, making an application to the department of motor vehicles. “It was the impact on his driver’s licence that resulted in [Abdulkadir] bringing this motion to set aside the default judgment,” the court found.

“On June 5, 2023, [Abdulkadir] sent his motion record in the current motion to set aside [Gore’s] default judgment,” the court noted. “The materials were emailed to the Insurer from the same email address that the Insurer had used in every instance referred to in the above [three-year] chronology.”

In setting aside Gore’s judgment against Abdulkadir, the court found the insured had an argument to make that the judgment should not be enforced. The legal test is whether such an argument could be made, not whether it is true, as the court notes. The truth of the argument would still have to be tested in court.

One part of the legal test involves determining who would be prejudiced the most — the insured, if the judgment is enforced, or the insurer, if the judgment is set aside.

“The prejudice to [Abdulkadir] is the payment of a significant sum of money,” the court found. “He is a truck driver, living in rental accommodation in downtown Hamilton, Ontario. Without the specifics of his finances, I infer that the payment of $150,000 would be a serious burden to him.

“The Insurer has already paid out to Alsop and that litigation has concluded. The additional prejudice to the insurer in setting aside the default judgment is limited to the additional costs and effort involved in a continuation of the litigation.

“On balancing the two, I find that the prejudice to [Abdulkadir] is more substantial.”

Feature image courtesy of iStock.com/Jirapong Manustrong