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Improperly cancelled policy leaves insurer liable

Allstate Insurance Co. v. Her Majesty the Queen, 2020 ONSC 830

Allstate Insurance Company issued Mr. Daniel Miller an automobile insurance policy in July of 2012. In April of 2013, the policy was cancelled due Mr. Miller not paying his premiums. In March of 2014, Mr. Miller paid the amount owing on the cancelled policy and applied for a new insurance policy. The new policy was issued to Mr. Miller and was effective from March 22, 2014 to March 22, 2015.

Mr. Miller again did not pay his premiums. On May 12, 2014, Allstate Insurance Company sent Mr. Miller a notice that his policy would be cancelled on June 14, 2014 if he did not pay the outstanding premiums. However, the notice was returned to Allstate insurance Company and was marked “Moved/Unknown”.

Six months later, In October of 2014, the insured suffered severe injuries in a motor vehicle accident which rendered him quadriplegic. Allstate Insurance Company refused coverage on the basis that it had cancelled the policy and the insured took the position that the cancellation was defective and he was entitled to coverage. The matter proceeded to arbitration, where the arbitrator found that the policy was not properly cancelled. The matter went to the Ontario Superior Court of Justice for appeal of the ruling.

The Ontario Superior Court of Justice concluded that an insurer seeking to rely on a cancellation of a policy mid-term must demonstrate that it complied with the statutory conditions, which include providing the insured with an address where the outstanding payment could be delivered to avoid termination. Because the insurer’s letter failed to include an address where the insured could have paid Allstate the outstanding premiums to avoid the cancellation, and the letter was not sent to his last known address, the notice of termination was not valid.

You can read Allstate Insurance Co. v. Her Majesty the Queen, 2020 ONSC 830, Ontario in its entirety here.

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