It seems like you can get anything delivered these days: pizza, clothing, cosmetics, groceries, alcohol – the list is endless. Most people making these deliveries are using their personal vehicles. Yet how many people are informing their insurers of the business use of their vehicles?
In the recent decision of Euler v. Economical Insurance, the insured was using his personal vehicle to deliver pizzas. The Court considered whether his failure to report that activity was a material change in risk.
Mr. Euler had purchased his policy in 2014 from Economical and completed the required application form. The policy had renewed over the years and the relevant policy period was for the 2017-2018 policy term. The premium was based on the initial application in which Mr. Euler reported that he primarily used his vehicle for pleasure and that he had a 2 km commute to work. He never advised Economical of any changes regarding the use of his vehicle.
Mr. Euler was involved in an accident in October 2017 and admitted that it occurred while he was delivering pizza for Domino’s. He was subsequently sued for personal injury and reported the claim to Economical. Economical denied coverage on the basis that Mr. Euler failed to advise that he was using his vehicle to deliver pizzas prior to the accident.
The Court agreed with Economical. Mr. Euler’s business use of delivering pizzas was a material change in risk. The information was Mr. Euler’s knowledge and he was required to promptly notify Economical of the change. Economical provided uncontroverted evidence that, had it been aware of the risk, it would have refused to accept the risk or imposed special conditions.
Mr. Euler also attempted to argue that Economical should have terminated or voided the policy in order to avoid having to provide him with a defence. However, in light of the Court of Appeal’s decision of Merino v. ING, the Court confirmed that a misrepresentation or a failure to notify of a material change in risk does not void or automatically terminate the policy but simply affects the right to claim under the policy pursuant to s. 233 of the Insurance Act.
The Court ultimately concluded that Economical was not obligated to defend and indemnify Mr. Euler under the policy.
This case confirms that a failure to report use of a personal vehicle for deliveries could be a material change in risk that will affect the right to claim under the policy. However, this does not mean that an insurer is completely off the hook in all claims involving a breach. It is important to keep in mind that, under s. 258 of the Insurance Act, an insurer is still required to provide coverage to the mandatory minimum limits of $200,000.00 despite this type of breach (which was acknowledged in the decision be Economical) and it should be adding itself as a statutory third party in claims such as this one. Furthermore, s. 233 explicitly states that it does not invalidate a claim for accident benefits. However, s. 31 exclusions may well apply which would limit the benefits the insured is entitled to under the policy.
See Euler v. Economical Insurance, 2021 ONSC 3018 (CanLII).
