Duty to Defend; Actions - Third Parties; Practice - Default Judgment - Setting aside

Economical Mutual Insurance Co. v. Montgomery

Court sets aside noting in default on the basis that delivering a statement of claim to an insurer demonstrates an intention to defend.

[2013] O.J. No. 4753

2013 ONSC 6153

Ontario Superior Court of Justice

Master R. Dash

October 22, 2013

The defendants applied to set aside a noting in default in a tort action arising out of a motor vehicle accident. The plaintiff insurer was the liability insurer for the defendant "Sadie" who denied coverage to Sadie because the insured vehicle was knowingly driven by an unlicensed driver, the defendant "Randy". Sadie signed a non-waiver agreement in favour of the insurer, which settled the claims of the original plaintiffs, took an assignment of the plaintiffs' cause of action, and obtained an order to continue with the action as the plaintiff. The insurer noted the defendants in default (a defence had never been filed) and moved for judgment in the amount for which the claim had been settled.

The court set aside the noting in default on the basis that the defendants had demonstrated an intention to defend by delivering the statement of claim to their motor vehicle liability insurer to defend their interests. The defendants were never advised that a defence had not been filed on their behalf. They were never advised that they had a right to personally defend the action.

The court, after setting aside the noting in default, ordered that the defendants deliver their statement of defence within 20 days. The court noted that the defendants would be in a position to dispute both liability and damages contrary to the insurer's position that having settled the claim it could subsequently pursue the defendants for the amount paid in settlement.