Supreme Court agrees auto insurance companies can't retroactively rescind contracts

The Supreme Court of Canada has upheld a decision from the Ontario Appeals Court, which states an auto insurance provider can not rescind a policy under a specific condition because of false claims made on an application.

ING Insurance rescinded policy of man whose car collided with UWindsor student

Donald Leschied is the attorney for Karla Merino. He has been working on Merino's case since 2002. (Sanjay Maru/CBC)

Canada's highest court has upheld a lower court's ruling that auto insurance providers can't retroactively rescind insurance policies without just cause and at least 15 days notice.

In September 2002, Karla Merino — who was a student at the University of Windsor — was hit and injured by a man who was drunk while driving. She was 22 at the time.

A financial settlement was denied to the Merino family because the driver wasn't insured during the accident.

Intact Insurance — previously operating as ING Insurance  — claimed that problems with information disclosed on thd driver's insurance application meant the company had the right to rescind the policy.

According to the insurance company, the driver's spouse — who hadn't signed the policy — failed to accurately disclose her driving history.

As a result, the insurance company rescinded the driver's policy without providing 15 days notice as per law, determining that the failure to disclose the spouse's driving history meant the agreement between the driver and the company was never made. 

In 2017, a Windsor judge ruled in favour of the insurance company, a decision which the Merino family later appealed.

The Court of Appeals for Ontario overturned the initial decision in April 2019, determining that auto insurers in Ontario can't retroactively rescind a contract.

Additionally, the Appeals Court ruled that the insurance company's failure to provide the driver with at least 15 days notice of the contract's termination meant the contract wasn't legally terminated.

"The contract therefore remained in effect on the date of the accident," reads an excerpt from the April 2019 decision. 

That decision led the insurance company to file an appeal with the Supreme Court of Canada (SCC).

The SCC upheld the Ontario Appeals Court's decision Thursday, dismissing the insurance company's appeal.

"I think this insurer and all insurers are going to read this decision today, as they read the appeal decision in April, and I hope reasonable underwriters and reasonable auto insurers and their executives will take to heart what the law now says, and this won't happen again," said Donald Leschied, Karla Merino's attorney. 

A lawyer representing the insurance company declined to comment.

With files from Angelica Haggert and Sanjay Maru


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