The Insurer settled a motor vehicle claim and then sought reimbursement from the Insured on the basis of section 258(1) of the Insurance Act of Ontario. The Court held that the Insured was not required to reimburse the Insurer under the section, because the section required a judgment against the Insured, not merely a settlement.

Lockhard v. Quiroz, [2006] O.J. No. 4613, Ontario Court of Appeal

The Insurer settled the claim without notice to, or the consent of, the Insured. Judgment in favour of the injured party was obtained against the Insurer, but not against the Insured. The Court held that the plain language of s. 258(1) of the Insurance Act, R.S.O. 1990, c. I.8 provided for the application of insurance money in or towards satisfaction of a judgment recovered against the Insured. The section read:

Any person who has a claim against an Insured for which indemnity is provided by a contract evidenced by a motor vehicle liability policy, even if such person is not a party to the contract, may, upon recovering a judgment therefor in any province or territory of Canada against the Insured, have the insurance money payable under the contract applied in or towards satisfaction of the person’s judgment and of any other judgments or claims against the Insured covered by the contract and may, on the person’s own behalf and on behalf of all persons having such judgments or claims, maintain an action against the Insurer to have the insurance money so applied.

The Court held that absent an agreement between the Insurer and the Insured, the recovery of a judgment was a prerequisite to any entitlement under s. 258(1) to access available insurance monies. The Court held that the scheme envisioned by s. 258 contemplated the balancing of an insurer’s right to minimize its exposure to a tort claimant with an insured’s right to be protected against unreasonable settlements by its insurer. The Court then set aside the summary judgment of the motions judge.

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