Car Insurance Cancelled or Lapsed, and Then an Accident in Ontario

Car insurance cancelled, and then an accident: why the dates matter

If your car insurance was cancelled or ran out and you then had an accident in Ontario, one question comes before almost everything else: was the policy still in force at that moment?

If it was, the policy's coverage may respond to the claims. If it was not, the situation changes: the owner or driver may face a claim with no insurer behind them, and an injured person may have to look at other sources of compensation.

How car insurance can end in Ontario

A policy can come to an end in a few different ways.

When can an insurer cancel a car insurance policy?

When an auto policy has been in effect for more than sixty days, the Compulsory Automobile Insurance Act (s. 12 (1)) lets the insurer terminate it only for one or more of four reasons:

1. Non-payment of the premium, or of any charge under an agreement tied to the contract.
2. False particulars given about the described vehicle, to the insurer's prejudice.
3. A knowing misrepresentation, or knowing failure to disclose a required fact, in the application.
4. A material change of risk, as defined in the statutory conditions.

There are exceptions. Section 12 (2) says the sixty-day rule does not apply to an insurer running off its business with the regulator's specific approval, or to a contract for a vehicle used in a business, trade or profession.

A second layer sits in the Insurance Act. Section 238 (1) says an insurer must not terminate a contract except on a ground it has filed with the regulator. A regulation (Reg. 664, s. 5 (1)) also says an insurer cannot terminate solely because the insured was placed with the Facility Association or because another insurer declined to cover them.

What notice must an insurer give?

Ending a policy is not only about having a reason. The Insurance Act also deals with how notice is given.

• Under s. 235 of the Insurance Act, an insurer may give a notice of termination by registered mail, hand delivery, prepaid courier or electronically, in accordance with the statutory conditions.
• Section 234 (1) makes the statutory conditions part of every contract they apply to, and s. 234 (2) says a variation of a statutory condition does not bind the insured.
• For non-renewal or renewal on varied terms, s. 236 (1) calls for at least 30 days' written notice to the named insured, or 45 days' written notice to the broker through whom the contract was placed, who in turn gives the named insured at least 30 days' notice (s. 236 (2) and (4)). Section 236 (3) says the notices must set out reasons.
• Section 236 (5) adds that the contract continues in force until those steps have been followed. Section 236 has exceptions (s. 236 (6)), and Reg. 664, s. 4 exempts fleet contracts, so whether it applies depends on the policy.

The notice period and delivery rules for a mid-term termination may be found in the statutory conditions printed in the automobile policy. The statutory conditions are not set out in this article, so no day-count is given here. A lawyer will read the conditions printed in the actual policy.

What about non-payment or a bounced payment?

The Insurance Act deals with non-payment and returned payments in a few ways.

• Section 134 (1) of the Insurance Act says that once the policy has been delivered, the contract binds the insurer even if the premium has not in fact been paid.
• Section 134 (3) says that when a cheque or similar payment instrument given for a premium is not honoured, the insurer may end the contract promptly by written notice sent by registered mail, personal delivery, prepaid courier (with a delivery record) or, with the insured's consent, electronically.

Why the date of the accident and the date of cancellation matter

A cancellation notice may name an effective date. A lawyer will typically compare at least these dates:

1. The policy start, renewal and expiry dates.
2. The date the notice was sent, and the date it was received (the delivery method can matter).
3. The termination date the insurer says applies.
4. The date and time of the accident.
5. Any payment made or refund issued between those dates.

In prosecutions under ss. 2, 13 or 13.1, a statutory declaration from an insurer's officer or employee can serve as proof, absent contrary evidence, of whether the insurer covered a vehicle on stated dates (Compulsory Automobile Insurance Act, s. 13.2). That is one reason the insurer's records and the policyholder's own records are often compared closely.

An operator directly or indirectly involved in an accident must also disclose the insurance details when asked by anyone involved: particulars that include the insurer's name, the policy number, and the effective and expiry dates of the contract (s. 4 (1) and (2)).

What if there was no coverage on the accident date?

Under s. 2 of the Compulsory Automobile Insurance Act, and subject to the regulations, an owner or lessee who operates a vehicle, or permits it to be operated, on a highway without insurance commits an offence, and our guide on driving without insurance in Ontario covers the penalties. This article is about the civil side, and the options sometimes considered are these:

• Your own policy's uninsured-automobile coverage. Section 265 (1) of the Insurance Act requires motor vehicle liability policies to cover damages an insured person is legally entitled to recover from an uninsured or unidentified owner or driver, within terms and limits set by regulation. It is tied to the other party being uninsured or unidentified, so it is a separate question from whether your own policy was in force.
• Statutory accident benefits. Section 268 (2) sets out an order of recourse for statutory accident benefits. The last step is the Motor Vehicle Accident Claims Fund, and the Motor Vehicle Accident Claims Act (s. 6 (1)) allows a person with that recourse to apply for payment of benefits out of the Fund. Which step applies depends on the person's circumstances. See our guide to the Motor Vehicle Accident Claims Fund.
• Being sued without coverage. If you are the defendant, our guide on being sued after an accident with no insurance explains the process.

A person who cannot find insurance in the ordinary market may be able to use the Facility Association. The Act (s. 7 (3)) says its plan exists to provide automobile insurance to owners and drivers who would otherwise be unable to obtain it.

When it is worth talking to a lawyer

These are common triggers, in neutral terms:

• You received a cancellation or non-renewal letter and are unsure whether it was valid or properly delivered.
• You were in an accident and the insurer says the policy was not in force.
• You have been served with a statement of claim. The Insurance Act (s. 259 (1)) says an insured sued over an auto accident must notify the insurer in writing within five days of being served. How this applies when coverage is disputed depends on the facts and should be confirmed with a lawyer immediately.
• You are injured and the insurer has refused to pay benefits because of the cancellation.

Limitation periods run in the background. The basic limitation period is two years from the day a claim was discovered (Limitations Act, 2002, s. 4), and exceptions can apply. What applies to a particular claim depends on the facts and should be confirmed with a lawyer.

What to gather

• The policy documents, including the printed statutory conditions.
• Every letter, email or text from the insurer or broker, with envelopes or delivery records.
• Proof of payments: bank statements, receipts, instalment agreements, returned-payment notices.
• Any refund cheque or record of a refund.
• Your insurance card and renewal paperwork.
• The police report, photos and your own timeline of events.