Will your insurance deliver?

July 5, 2021

By Brian Babcock

Are you driving your own vehicle to do deliveries or other work?  If so, you need to inform your automobile insurer of that fact, or you may find yourself without coverage following an accident.

In the emerging “gig economy”, this well established concept of insurance law will have application to many more people, whether they drive for a giant like Uber or Skip the Dishes, or their local pizza place.

The standard Ontario automobile policy requires an insured (the vehicle owner) to notify the insurer of the use of their vehicle, and of any change in use. This is because different uses have different ratings to price the policy.

Failure to tell the insurer about the actual planned use at the time of purchasing the policy, or if you change the use, may result in a loss of coverage. Typically, this means that the owner and driver will not be paid for property damage to their own vehicle and are not entitled to indemnity for any claims by other persons who suffered losses in the accident. The insured does remain entitled to certain statutory accident benefits.

In a recent Thunder Bay case, Euler v. Economical Insurance, a judge confirmed that an insured who had an accident while delivering pizzas was not entitled to coverage (other than accident benefits). The change in use from personal pleasure driving to delivering pizzas was a “material change”.  The change was “material” because Economical would not have insured the vehicle for fast food delivery. The failure to notify was a breach of the policy.

Euler argued that because Economical did not void the policy from the date of issue, and did not refund the full premium, they affirmed coverage. However, a 2019 Court of Appeal decision had stated that, under the current wording of the Insurance Act, the phrase “a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited” means that the insurer does not need to follow the former practice of declaring the policy void.

An injured party may still claim against Economical under a provision of the Insurance Act that is referred to as the “absolute liability” provision, which provides that even if there is a breach, Euler’s insurer must pay the other side up to $200,000.00 in damages and interest. A person in Euler’s position, however, gets no comfort from this provision, as they are required to repay their insurer for the payments made, and may have their driving privileges suspended if they fail to do so.

Although this may become more prevalent in the “gig economy”, this principle also applies to regular employees who use their vehicles for work purposes. It is more critical for gig workers, who may find that increased insurance costs make the work unprofitable.

Time to check your coverage and make sure it matches your current driving patterns. If that use changes, notify your insurer promptly.