A rehabilitation clinic is not entitled to bring an action against an insurer for payment of treatment to an insured until the insured’s action against his insurer is resolved

A rehabilitation clinic that provided services to two individual Insureds brought an action against the Insureds and their Insurer for payment for services rendered. The Court found that pursuant to section 258(1) of the Insurance Act, R.S.O. 1990, c. I.8, a judgment against the Insured was a prerequisite to bringing an action against the Insurer. The current action was therefore premature against the Insurer, but the Court entered judgment against the individual Defendants.

1489018 Ontario Ltd. v. Vasile, [2006] O.J. No. 5187, Ontario Superior Court of Justice, C.W. Kilian Deputy J., December 29, 2006

The Plaintiff was a rehabilitation clinic which provided services to the two Insureds who had been injured in a car accident. The Insurer had insured the Insureds’ vehicle and was responsible for paying statutory benefits under the no-fault part of the policy. The Plaintiff submitted treatment plans with estimated costs for both of the Insureds to the Insurer in March of 2003. By letter, the plans were approved and the treatment began. However, the letter approved the treatments on the condition that the Plaintiff submit their account first to another insurer, and if that insurer failed to pay any or part of the account, the Insurer would pay the rest. The Plaintiffs did not follow these instructions and sent the invoices only to the Insurer. On May 14, 2003, the Plaintiff received a telephone call from the Insurer stating that the treatment approval had been withdrawn. The Court found that there was no requirement under the Insurance Act that a Third Party submit a billing for statutory benefits to anyone other than the Insured or the Insurer. The Court also rejected the Insurer’s argument that the Insured gave false information which voided his coverage, since section 233(2) provided that that defence was not applicable under the statutory accident benefit schedule. The Court then found that section 258(1) precluded the Plaintiff’s action against the Insurer, because until there is a judgment against the Insured, there is no cause of action on which the Plaintiff could sue to have insurance money applied. The Action against the Insurer was commenced prematurely.

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