The Court of Appeal dismissed the appeal of motion judge’s decision dismissing the Plaintiff’s claim against the Defendant’s Insurer pursuant to s.258(1) of the Insurance Act because the Insured was not entitled to indemnity under the policy.

Winch v. Kedgh, [2006] O.J. No. 3182, Ontario Court of Appeal

This was an appeal by the Defendant, CAA Insurance, from a decision in chambers that Royal & Sun Alliance Insurance (“Royal”) was not required under s. 258(1) of the Insurance Act, R.S.O. 1990, C. I-8, (the “Act”) to compensate the Plaintiff. The Plaintiff had been involved in a motor vehicle accident with the Defendant, who at the time of the accident, was driving a cube van owned by his employer with a weight of more than 4500 kg. Prior to the accident, Royal issued a policy of auto insurance to the Defendant that restricted coverage for vehicles driven by the insured to those weighing less than 4500 kgs.

Section 258(1) of the Act provides that an injured third party may enforce a motor vehicle insurance contract directly against the insurer of the person who caused the motor vehicle accident.

In chambers, the Judge found that Royal was not obliged under s. 258(1) of the Act to compensate the Plaintiff because on a plain reading of s. 258(1), it is triggered only when a person has a claim against an insured for which indemnity is provided by a motor vehicle policy. In this case, the policy did not provide coverage for the claim that was advanced, there was no possibility of indemnity and therefore s. 258(1) did not apply.

The Court of Appeal dismissed the appeal holding that the motions Judge was correct in ruling that there could be no recovery by a third party beneficiary under s. 258(1), unless the insured could have been entitled to recover under a motor vehicle liability policy. Because, in this case, the policy did not provide coverage for the claim that was advanced, there was no possibility of indemnity and s. 258(1) did not apply.

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