Six Year Delay May Prejudice Position In Priority Dispute

More than six years after an accident, who is first loss insurer where a plaintiff is insured under a policy covering his personal vehicle, and also under a policy covering his employer’s fleet of vehicles? The Court has answered that it very much depends on what happened during those six years. Justice Morgan recently considered a priority dispute over unidentified motorist coverage between the insurer of the plaintiff’s personal vehicle (“RSA”) and the insurer of his former employer (“AIG”), where the application was commenced some six years after the subject accident.

In Royal & Sun Alliance v. American Commercial Insurance Co., 2015 ONSC 3518¸ Justice Morgan considered an application from RSA for a declaration that AIG was in priority. The dispute arouse out of an alleged accident on Highway 401 near Belleville on October 11, 2007. The plaintiff claimed he was in the process of checking his vehicle’s tires on the side of the highway when he was brushed by an unidentified transport trailer unit rushing by, which did not stop and has not been identified.

In the normal course, the priority regime set out in section 277(1) of the Insurance Act determines the issue of priority for unidentified coverage: an “owner’s policy” is first loss insurance, and any other valid policy is excess insurance only.

However, in this case, Justice Morgan noted that the timing of the proceedings added complexity to what would otherwise be a more straightforward dispute. In 2007, the plaintiff sought and received accident benefits from RSA, and disclosed to RSA that he was allegedly injured while operating his employer’s vehicle, which was insured. The plaintiff also commenced a lawsuit against RSA, which went through examinations for discovery and mediation without RSA raising any issues about not being in priority to pay for the unidentified motorist coverage. It was not until 2013 that RSA took the position that AIG had priority. After this, the plaintiff commenced a second claim against AIG on the alternative theory that the plaintiff was an “operator” of his employer’s vehicle – rather than a “pedestrian” as originally plead in his action against RSA – making AIG the first loss insurer as an “owner’s policy”.

Given the procedural history, Justice Morgan dismissed the application, but did so without prejudice to its being litigated at trial. The application was dismissed on two grounds. First, without an evidentiary record, the pleadings alone were insufficient to establish whether the plaintiff was an “operator” or a “pedestrian” at the time of the accident. The specific circumstances of the plaintiff at the time of the accident were a question of fact, and Justice Morgan was not prepared to determine that the plaintiff was an “operator” of his employer’s vehicle on the basis of the pleadings alone. Instead, he noted that the evidentiary record needed for that determination will be established at trial.

Second, Justice Morgan found that RSA may be estopped from contesting priority at all. There was no explanation offered for the delay of RSA is taking the position that it was not first in priority. He emphasized the Court of Appeal ruling in McArdle v. Bugler (2007), 87 O.R. (3d) 433 that if an insured is entitled to statutory accident benefits, he is also entitled to unidentified motorist coverage. Without determining the issue, Justice Morgan provided strong obiter dicta that it would be counter-intuitive for RSA to pay the statutory accident benefits without disputing priority, and then much later for AIG to be first loss insurance.

Justice Morgan concluded that it was impossible to weight the equities of RSA’s priority position, or determine the question of whether the plaintiff was an “operator” of the vehicle or a “pedestrian”, without assessing evidence. The trial judge may revisit the issue, and on the basis of a full factual record, may make the priority decision.


This was an application on the merits of a priority dispute, but the Court did not have the benefit of a full factual record. Even still, the Court offers a clear indication that insurers must not delay in investigating and litigating priority disputes. Without determining the issue, Justice Morgan suggests that an unexplained delay of six years, such as the one in this case, may well prejudice any late-in-the-day priority position.


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This blog entry has been placed on our website to inform readers in a general way of the authors’ view of the law at the time of its presentation. It is not intended as legal advice and no reliance may be placed on its contents. Some principles of law or procedure may have changed and may no longer be applicable since its publication. The authors and our firm disclaim any liability arising from reliance on any part of this blog entry.


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