Executive Summary: Key Legal and Evidentiary Issues

• Central dispute concerns The Personal Insurance Company’s denial of coverage based on alleged material misrepresentation and non-cooperation.

• Plaintiffs seek disclosure of documents and answers regarding the insurer’s off-coverage position, specifically the factual basis for denial.

• The scope of discovery and whether coverage issues are relevant and discoverable before liability is determined are contested.

• Application of Rule 31.06(4) and (5) regarding disclosure of insurance policy conditions and denials is addressed.

• The court considers the extent to which privilege protects information sought by the plaintiffs.

• Costs are awarded to the plaintiffs, and The Personal is ordered to provide further written discovery within 30 days.

Background and facts of the case

This case arises from a single-vehicle motor vehicle accident that occurred on August 20, 2016. After leaving the Luxy Nightclub intoxicated, Lerrell Stennett drove her vehicle westbound on Highway 7 West, near Kipling Avenue, lost control, and crashed into a pole. Kaijah Harris, a passenger in the vehicle, sustained catastrophic injuries. At the time of the accident, Kaijah was 20 years old. The plaintiffs, Kaijah Harris and Velma Harris, commenced an action against several defendants, including Lerrell Stennett (the driver), Jouvaine Stennett (the owner of the vehicle), various corporations, Allstate Insurance Company of Canada, and The Personal Insurance Company.

The Personal insured the vehicle owned by Jouvaine M. Stennett. Following an investigation, The Personal denied liability under the policy with respect to both Jouvaine M. Stennett and Lerrell U. Stennett, citing material misrepresentation and non-cooperation as reasons for denial. On January 23, 2019, The Personal was added as a statutory third party in accordance with section 258(14) of the Insurance Act, R.S.O. 1990, c.I.8, with all rights under section 258(15) of the Act. Allstate Insurance Company of Canada was also a defendant, providing uninsured, underinsured, and unidentified insurance coverage to the plaintiffs.

Procedural history and policy terms

On November 2, 2021, the Examinations for Discovery of The Personal’s representative, Debbie Hejno, were conducted. Ms. Hejno is the bodily injury adjuster for The Personal. Various undertakings, refusals, and under advisements (now deemed refusals) were made at her examination. The primary purpose of the discovery was to determine the basis for The Personal’s off-coverage position. The Personal provided the plaintiffs with general reasons for the denial of coverage—material misrepresentation and non-cooperation—but refused to answer questions about the factual basis for the denial and the investigation leading to it.

If The Personal’s off-coverage position is valid, its exposure to damages is reduced from $1,000,000.00 to $200,000.00. Settlement discussions between the plaintiffs and the corporate defendants progressed, and a tentative settlement was reached with Lux Entertainment, Kris Lemanski, G5 Events Inc., Fortress Security, and 2748355 Canada Inc. The only practical issue remaining is whether The Personal would owe the plaintiffs $1,000,000.00 or only $200,000.00, depending on the validity of its off-coverage position.

Despite requests, The Personal did not agree to allow the plaintiffs to finalize the settlement with the corporate defendants and move directly to address the coverage issue. The plaintiffs were directed by Justice Casullo on December 3, 2024, to bring a motion to obtain productions from The Personal arising from Ms. Hejno’s discovery. A second pre-trial conference was held before Justice Sutherland on December 17, 2024, where the parties were also instructed to bring a motion to address the coverage issue as between the policies of insurance.

Legal analysis and court’s reasoning

The Personal argued that the plaintiffs were not entitled to the refused discovery questions because they were not relevant to the pleadings and that some information was protected by solicitor-client and litigation privilege. The Personal maintained that issues of insurance coverage are to be kept separate from liability proceedings and that a statutory third party is not required to define or explain its position regarding coverage issues during examinations for discovery.

The court disagreed, finding that while coverage issues are distinct from liability, the information sought is relevant to the litigation and necessary for the matter to proceed efficiently. Rule 31.06(4) and (5) of the Rules of Civil Procedure allow for discovery of the existence, contents, and conditions of insurance policies that may affect the outcome of the case. The court cited case law, including Maccaroni v. Kelly, 2011 ONCA 411, Lica v. Dhaliwal, 2015 ONSC 3888, and Prentzas v. Rivera, 2015 ONSC 5867, confirming that plaintiffs have the right to obtain particulars of a denial of coverage and the factual basis for such denial from a statutory third party insurer. The rationale is that plaintiffs and their own insurers need this information to determine whether additional coverage is available.

The court concluded that the plaintiffs are entitled to production of documents and information relevant to the coverage determination and further discovery to answer all reasonable questions arising from these documents. Where relevant documents are protected by privilege, the plaintiffs are still entitled to the factual information contained in those documents relevant to coverage. The Personal was ordered to provide answers to the undertakings and refusals as outlined in the original order within 30 days of the release of the decision. If The Personal has concerns about prejudice or privilege, it may seal those answers and provide them to the court for review under Rule 31.06(6).

The plaintiffs also sought to have The Personal’s representative, Ms. Hejno, reattend for further discovery. The court determined that any additional information required beyond the productions could be sought in writing and that reattendance would not assist and would create additional costs.

Outcome and costs

The court ordered The Personal Insurance Company to provide answers to the undertakings and refusals as outlined in the original order within 30 days of the decision’s release. Costs were awarded in favor of the plaintiffs in the amount of $5,000, inclusive of disbursements and HST, to be paid within 30 days, with post-judgment interest to accrue in accordance with section 129(1) of the Courts of Justice Act.