Insurers breached duties to an insured in regards to vehicle payment and repairs

Insurers were found liable to pay damages for breach of an insurance contract and breach of the duty of good faith. The insurers failed to adhere to the notice period for communicating their intention to repair a vehicle instead of making a payment, and did not communicate clearly with their insured, which led to the insured suffering damages.

Insurance law – Automobile insurance – Notice and proof of loss – Breach of policy – Good faith; Damages.

Douglas v. Aviva Canada Inc., [2026] O.J. No. 2217, Ontario Superior Court of Justice – Small Claims Court, April 20, 2026, A. Deveaux Deputy J.

The insured had an insurance policy with the insurers for his 2020 Toyota Highlander, which was stolen on December 21, 2022. The insured submitted a claim for the loss on the same day and then purchased a new vehicle of the same make and model. The stolen vehicle was recovered by police around January 11, 2023, and the insurers were informed on January 13, 2023. Although the insured did not submit a proof of loss, the insurers processed the claim without it and did not request one. On January 13, 2023, the insured received an email from the insurers declaring the vehicle a total loss, which was later described as an automated error, though it was found that to be generated, someone with the insurers had to declare the vehicle a total loss. Notwithstanding their declaration, the insurers later decided to repair the vehicle, communicating this decision to the insured on March 7, 2023. Repairs were completed in July 2023, and the insured found himself with two vehicles. A Carfax report for the first vehicle stated it was a total loss, and the insured ultimately sold it to a dealership after failing to find other buyers.

Section 8.6(6) of the Ontario Automobile Policy – Owners Policy allows an insurer to repair, rebuild, or replace damaged or lost property instead of making payment, provided the insurer gives written notice of this intention within seven days after receiving the proof of loss. The Court found that the insurers failed to adhere to the seven-day period of notice, which resulted in loss of right to elect to repair, and obligated them to pay damages under the policy. The Court also found that the insurers breached their duty of good faith by misleading the insured about the claim’s status, failing to communicate clearly and promptly, and attempting to rely on a policy provision they knew they had not complied with to avoid payment. The Court awarded damages to the insured based on the difference between the cash value of the first vehicle and the amount received from the sale, as well as carrying costs of the first vehicle.

This case was digested by Mark A. McPhee and edited by Steven W. Abramson of Harper Grey LLP.  If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].