Section 263(5)(a.1) of the Insurance Act, R.S.O. 1990, c 1.8 allowed the insured to recover property damages in excess of those paid by the insurer from the other driver in a motor vehicle accident pursuant to a handwritten contract where the parties had not agreed to forego their rights to claim under their insurance coverage.

Insurance law – Automobile insurance – Policies and insurance contracts – Actions – Statutory provisions – Contracts – Interpretation – Liability insurance – Motor vehicle accidents – Property damage

Hafeez v. Sunaric, [2015] O.J. No. 3286, 2015 ONSC 4065, Ontario Superior Court of Justice, June 23, 2015, P.M. Perell J.

The insured was involved in a motor vehicle accident in a parking lot. Following the accident, the insured entered into a handwritten contract with the other driver wherein the other driver admitted full liability and agreed to pay the insured $15,000, minus the money the insured received from the insurer. The insurer paid the insured $6,500 for the damages to his vehicle. The insured then brought a small claims action seeking to recover the $8,500 difference from the other driver based on the contract. The lower court dismissed the action on the basis that the contract was not enforceable as it did not provide for any consideration and, alternatively, it was barred by s. 263(5) of the Insurance Act, R.S.O. 1990, c 1.8. On appeal, the insured succeeded on both grounds.

The court held that the contract contained adequate consideration as the insured had agreed to forego his right to claim more than $15,000, which effectively amounted to a settlement agreement of the insured’s property damage claim against the other driver.

Turning to the property loss scheme introduced by s.263, the court noted that its function was to preclude tort claims between insurers and prevented the insured from recovering property damages from anyone other than his or her own insurer. Of the limited exceptions to s.263 is the ability of the insured to bring an action under an agreement, other than a contract of automobile insurance pursuant to s.263(5)(a.1), which the court noted had been applied to situations where the other driver agrees by oral contract to pay for damage to the insured’s vehicle without resorting to insurance. In this case, the issue was whether s.263(5)(a.1) applies where the other driver agrees by written contract to pay for damages without the parties agreeing to waive their rights to resort to their insurance coverage.

The court found that there was nothing in the statutory scheme that restricted the application of s.263(5)(a.1) to situations where the parties had forgone their rights to resort to their insurance coverage. As the two conditions for the enforcement of an agreement under s.263(5)(a.1) were met, namely: (1) there was an agreement for the damage, content and loss of use; and (2) the agreement was between the insured and the person at fault or negligent, the court allowed the appeal in favour of the insured.

This case was digested by Michael J. Robinson and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at or or review their biographies at

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