Does a Retroactive Denial of Coverage Bar a Plaintiff from Suing in an MVA?

Short answer, No. Or at least that is the answer in the case of Alof v. Ikeno, 2014 ONSC 2087 (CanLII)

In this case, Matheson J. considered section section 267.6 of the Insurance Act in the context of a retroactive denial of motor vehicle insurance coverage by a plaintiff’s insurer on a summary judgment motion brought by the defendant.

The defendant’s position was that because the plaintiff had retroactively been denied coverage the action was barred by s. 267.6, the text of which reads as follows:

267.6 (1) Despite any other Act, a person is not entitled in an action in Ontario to recover any loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile if, at the time of the incident, the person was contravening subsection 2(1) of the Compulsory Automobile Insurance Act [CAIA] in respect of that automobile. [Emphasis added.]

(2) Subsection (1) applies whether or not the person was prosecuted for or convicted of an offence under the [CAIA].

The plaintiff had previously lived in Nova Scotia and had moved to Ontario. He had registered his vehicle in Ontario. His insurer took the position the policy was void, retroactive to the date on which the vehicle was registered in Ontario as this represented a material change in risk.

W. Matheson J. grounded her decision on the temporal aspect of s. 267.6 of the Insurance Act, “at the time of the incident”, concluding that despite the strict liability nature of subsection 2(1) of the Compulsory Automobile Insurance Act, there was insurance in place at the time of the incident as the insurer had confirmed coverage within days of the accident. Her honour quoted a note made by the insurer, which stated the insured had advised them he was in Ontario, but that he wasn’t sure if he was staying.

Her Honour then proceeded to back up her decision by stating that, while it was not necessary to consider the presumption against interfering with the right to bring an action, consideration of it would have led her to the same result.

Although the decision is clearly grounded in a finding that there actually was insurance coverage at the time of the accident, it seems the question really being answered is whether the denial was unreasonable. Much has been said about human perception of time. It appears in this case the courts have said retroactive denials, at least in the auto context, are not really retroactive. No time travelling allowed.