Two cases decided within the last year have confirmed that an insurer which adds itself as a Third Party pursuant to Section 258 (14) of the Insurance Act (the off-coverage insurer) is required to answer questions and disclose information in relation to the insurer’s off-coverage position. No longer can the insurer wait until the final determination of the main action prior to dealing with the insurance coverage issue.

In the case of Lica v. Dhaliwal, 2015 ONSC 3888, the off-coverage insurer was required to answer questions posed by the Plaintiff by way of written interrogatories and subject to the potential need for further input from the Court with respect to issues of relevance, prejudice and privilege. In the case of Prentzas v. Rivera, 2015 ONSC 5867, the insurer was required to produce documentation, including portions of the broker’s file, the insurance application, the insurer’s notes on issuing and cancelling the policy, correspondence regarding the policy and its cancellation, and underwriting guidelines regarding cancellation.

The basic reasoning behind this disclosure obligation relates to the Plaintiff having to satisfy the OPCF 44R insurer that the full limits from the off-coverage insurer’s policy are “reduced by operation of law to the statutory minimum limits” in order to satisfy the OPCF 44R insurer that the Plaintiff is an inadequately insured motorist.

Further, the Court, in both cases, reasoned that the disclosure has nothing to do with any determination of the coverage issue as between the off-coverage insurer and its insured. It has to do with allowing the OPCF 44R insurer to assess its exposure and set proper reserves. It’s also aimed at facilitating potential settlement as between the OPCF 44R insurer and the Plaintiff. As indicated by Justice Donohue in the Prentzas case, “personal injury claims settle often because the surprises have been removed by the Rules of Civil Procedure, which favour disclosure of all documents relevant to an issue in the action.”

I am aware that the Lica decision is under Appeal.