Executive Summary: Key Legal and Evidentiary Issues

• The Court of Appeal for Ontario dismissed the appellants' appeal from a motion judge's refusal to permit an amendment to their statement of defence.

• Appellants had sought to plead that the insureds lied about how the respondent was injured, framing this as civil fraud.

• Justice Clyde Smith declined the amendment based on a finding of non-compensable prejudice to the respondent.
• Rule 26.01 of the Rules of Civil Procedure allows amendments at any stage unless non-compensable prejudice results.
• Panel members found the existing pleading already let appellants defend against the indemnity claim and the relief-from-forfeiture request.
• By agreement, costs of $15,000 were ordered payable to the respondent.

Facts of the case

Maria Natario suffered catastrophic injuries in a fall through a floorboard in a house insured by RBC Insurance Company of Canada and Aviva Insurance Company of Canada, whose insureds included Kevin David Sherkin. Following her judgment against the insureds, Natario obtained a consent order dated October 13, 2021, issued by Edwards R.S.J., allowing her to claim indemnity directly from the insurers under s. 132(1) of the Insurance Act. The insurers sought to amend their amended statement of defence, pleading that the insureds had lied about how Natario was injured — claiming she fell down the stairs rather than through the floorboard — and that this alleged lie caused losses to the insurers. They wanted to characterize this conduct as civil fraud. Justice Clyde Smith of the Superior Court of Justice dismissed the motion to amend in a decision dated December 10, 2025, with reasons reported at 2025 ONSC 6921, and the insurers appealed to the Court of Appeal for Ontario, with the matter heard and decided orally on June 29, 2026.

Policy terms or contractual clauses at issue

The document does not quote or describe specific insurance policy wording; the dispute centers on statutory and procedural provisions rather than contractual clauses. At issue were s. 132(1) of the Insurance Act, R.S.O. 1990, c. I.8, which allows a judgment creditor to claim indemnity directly from a defendant's insurer, and rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which permits pleading amendments at any stage unless doing so would cause non-compensable prejudice.

Court's reasoning and analysis

On appeal, the insurers argued that the motion judge had ruled a civil fraud defence was never legally available to answer a s. 132(1) application. The panel — Roberts, Coroza and Sossin JJ.A. — rejected that reading of the decision below and found it unnecessary to resolve the broader legal question, given the motion judge's independent finding of non-compensable prejudice. The panel also rejected the argument that the insurers were prejudiced by being unable to explicitly label the insureds' conduct as civil fraud, noting that their existing pleading already allowed them to defend against Natario's indemnity claim and her request for relief from forfeiture based on the insureds' alleged lies. The panel agreed with the motion judge that the proposed amendment was irrelevant. The motion judge, in explaining his decision, had pointed to the history of the matter and the timing of the amendment, concluding that permitting an irrelevant change so close to trial would cause the kind of prejudice to Natario that could not be compensated. The panel found no reversible error in that discretionary conclusion and saw no basis to interfere with it, consistent with rule 26.01's non-compensable-prejudice exception.

Ruling and overall outcome

Concluding that the motion judge's discretionary call was one open to him on the record, the Court of Appeal dismissed the insurers' appeal, leaving Natario's underlying indemnity claim intact and the proposed amendment refused. As agreed between the parties, Natario — the successful respondent — was awarded costs of the appeal in the all-inclusive amount of $15,000, payable by the appellant insurers.