Case Summary: Parent v Northbridge General Insurance Corporation
Defence + Indemnity
Loss of a reasonable opportunity to investigate and defend a claim due to the Insured’s extreme delay in reporting the incident to their Insurer constituted prejudice to the Insurer such that the Judgment granted against the Insured not enforceable against the Insurer (in non-auto cases).
Parent v Northbridge General Insurance Corporation, 2018 ABQB 263, per Fraser, J. 
FACTS AND ISSUES:
On April 7, 2007, the Applicant Parent, went to a pub on Whyte Avenue in Edmonton, Alberta. Parent was involved in an altercation and was taken through the kitchen area of the establishment, ending up in the alley behind the location. At some point during the commotion he suffered significant injuries. Consequently, he sued the pub on February 13, 2008.
The pub initially defended the action. A Statement of Defence was filed and Questioning took place. However, for some reason, the pub never notified its insurance company, Northbridge. On March 16, 2010 Parent was successful in having the Statement of Defence struck because counsel for the pub did not comply with undertakings. As a result, on October 30 Parent obtained Summary Judgment in his favour which, including costs and interest, amounted to $325,968.11.
In June 2014, after obtaining Summary Judgment, Parent discovered the Northbridge Insurance policy. Parent contacted Northbridge about the Judgment, which promptly denied any liability.
The question before was as to whether the Summary Judgment obtained by Mr. Parent against the Defendant pub could be enforced against Northbridge.
HELD: For the Insurer; application for Summary Judgment dismissed.
Section 534 of the Insurance Act did not apply because the pub was non-compliant with the terms of the insurance policy and Northbridge subsequently suffered prejudice.
- Citing Raywalt Construction Co. v. Allstate Insurance Co. of Canada, 2010 ABCA 320, Fraser, J. noted that in order to be successful the applicant must prove three things: (1) the existence of an agreement to indemnify; (2) that the damage occurred within the terms of the policy; and (3) that the insured was legally liable to the judgment creditor.
- In this case, Justice Fraser indicated that the issue was with step two. Northbridge contended the damage did not occur within the terms of the policy and therefore it did not have to provide coverage. Specifically, the pub did not comply with the policy by not providing notice of the incident, by not providing notice of the claim, by defending the action without the participation of the insurer, by improperly defending the claim, and by accepting liability.
- The Court found that Parent had not met the burden of proving a prima facie case against Northbridge, rejecting the insured’s argument that the pub’s consistent failure to notify Northbridge was an imperfect compliance such that the policy still applied. Fraser, J. found that the repeated failure to notify Northbridge was a non-compliance with the policy.
- In this case, the pub’s lack of cooperation was not inconsequential or trifling. It was substantial and repetitive and there was essentially no cooperation at all. Northbridge was prejudiced as it was unable to conduct any significant investigation of the incident or preserve evidence/witnesses.
Section 520 of the Insurance Act and the equitable relief provision therein were also held not to apply.
- Citing Van Oirschot v. Dow Chemical Canada Inc., 1993 CarswellAlta 36 (Alta. Q.B.), the Court stated that the general principle is that courts will exercise their discretion to relieve against forfeiture in favour of the insured where:
- The claimant has not been guilty of fraud or willful misconduct; and
- The insurer has not been seriously prejudiced by the imperfect compliance with the statutory condition.
- Instead of a delay of simply a few days in the jurisprudence cited, in this case the delay of over seven years. The Court held that as the insured attempted to defend the claim herself, and hired counsel to conduct the defence, there could be no doubt that Northbridge suffered prejudice from the delay.
- Most notably, the owner of the insured company was now deceased and there was no way to know her reasoning for not involving the insurance company.
- Northbridge's loss of any reasonable opportunity to investigate and defend the claim due to the extreme delay in reporting the incident constitutes prejudice against Northbridge.
Section 534 of the Alberta Insurance Act, R.S.A. 2000, c. I-3 provides that when a claimant obtains judgment against an insured that goes unsatisfied, the claimant may sue the defendant insured’s insurance provider. However, this provision expressly does not apply regarding auto insurance. For auto insurance, s. 579 provides that the claimant may claim against the defendant’s insurer for up to the minimum statutory limits of $200,000. The insurer can raise the defence of breach of policy for amounts exceeding that and has a right of action to claim against its insured to recover the payout.