This is an appeal from an interlocutory decision obliging the Appellant, Optimum Insurance Company, to defend its insured and pay the cost of independent counsel in an action arising from a motor vehicle accident. The appellant insurer sought a stay of the matter pending the outcome of another matter deciding the same issues. The court upheld the lower court finding that there was a duty to defend, regardless of whether there were parallel proceedings and refused to grant a stay.

Drane v. Optimum Frontier Insurance Co., [2004] N.B.J. No. 251, New Brunswick Court of Appeal

The Plaintiff, Mr. Drane, was one of the occupants of a motor vehicle that was involved in a single motor vehicle accident. He commenced an action against the named insured of the vehicle, and another occupant who Mr. Drane alleged was the driver. Another of the occupants commenced an action against Mr. Drane, alleging that Mr. Drane was the driver and that he was impaired at the time of the accident.

Optimum commenced a third action against Mr. Drane, seeking a declaration that there was neither a duty to indemnify nor to defend Mr. Drane, because he was driving impaired at the time of the accident, and in fact owned the truck at issue. Other grounds for those proceedings included an allegation that material misrepresentations as to the actual ownership of the truck were made during the process of applying for insurance.

The subject matter of this appeal was a fourth originating process, an application by Mr. Drane seeking a declaratory order that Optimum had a duty to defend and indemnify. The applications judge rejected Optimum’s request for a stay of the application until the other actions dealing with the issues could be decided, and ordered Optimum to indemnify Mr. Drane.

The appeal court held that there was insufficient information available to the applications court such that the questions pertaining to the alleged breaches of the policy terms or statutory conditions could be adjudicated upon summarily, and Optimum could have brought a motion to have the question of the duty to defend resolved on the evidence. The appeal was dismissed with costs to Mr. Drane.

To stay current with the new case law and emerging legal issues in this area, subscribe here.