Failure to Inform of G2 Driver Voids Policy

Article Summary

Note: This Blog was prepared by Robbie Brar, articlng student at Schultz Frost LLP

On January 25, 2019, the Ontario Superior Court of Justice released its decision in Seetaram v. Allstate Insurance Company of Canada, 2019 ONSC 683. In his decision, Justice Glustein ruled that the applicant’s policy of automobile insurance was void due to their failure to advise the insurer of a change in risk:

“Had Avinash been disclosed to Allstate as a licensed driver living in his parents’ household when the Policy was renewed on April 17, 2013, Allstate would not have agreed to insure the Applicants at the stated premium of $2,112. Instead, the annual premium would have almost doubled to $3,954, since Avinash was in a high-risk insurance category as a 17 year old male with a G2 license.”

Most notably, Justice Glustein found that the insurer did not have a duty to explain to the insured what constitutes a material change in risk, responding to the fact that the Applicants had interpreted the policy’s “full coverage” description to include all licensed drivers within the household.

This decision can be contrasted with an earlier decision in DeKoning v. Vector Insurance Network (Ontario) Limited, 2009 CanLII 43644 (ONSC), where the named insured did not fail in her duty to disclose a material change in the risk by adding an under-25 novice male driver in a high-risk insurance category to the policy.

The DeKoning case raised two issues: the duty of an insured to report to the insurer of a high-risk category driver who is listed on the Policy, and whether, and to what extent, the insurer is obligated in law to inquire into matters it regards as material to the risk prior to a renewal of coverage.

The insurer had elected to accept risk for newly appointed G2 driver for the following year, despite being well aware that the driver was added by it to the coverage in the year prior, while in G1 standing. Upon renewal, the insurer asked no question about his driving record, nor did it obtain low-cost information (Motor Vehicle Record) after he had been legally driving unaccompanied for the first time.

In DeKoning, the Court also found that, in the absence of inquiry by the insurer of the driving record of the added driver, and knowing that they are within a high-risk category, the driving record (MVR) was not material to the decision of the insurer to enter the contract of insurance by way of renewal. Accordingly, since the insurer saw no materiality to accepting the risk prior to renewing the applicant’s policy, the insured was not obligated to voluntarily disclose the material change in risk to the insurer.

The Court in Seetaram concluded that both s. 233(1)(a)(ii) of the Insurance Act and the Statutory Conditions were breached when the Applicant failed to disclose upon the renewal of the Policy that a 17-year-old, G2-licensed driver was living in the insured’s household.

Seetaram affirms an insured's positive obligation to notify the insurer of any change that a reasonable insurer would consider relevant to assess the risk.