What do you stand to lose?  Where an insured breaches a term of an insurance policy, the Court has discretion to grant relief from forfeiture where doing so will not result in prejudice to the insurer.

Ontario Superior Court grants relief from forfeiture following a breached policy term, in considering that the insured acted reasonably prior to and following the breach; the breach was not grave in the sense it did not cause harm to others and was borne out of a mistaken, but honest and reasonable, belief there had not been a breach; and that the loss the insured would suffer without coverage far outweighed any prejudice suffered by the insurer in granting coverage.

Insurance law – Automobile insurance – Valid driver’s licence – Breach of policy – Relief against forfeiture.

Gibbs v. Security National Insurance Co., [2025] O.J. No. 3660, Ontario Superior Court of Justice, August 13, 2025, I.G. Parghi J.

The insured was involved in a motor vehicle accident on July 3, 2021.  At the time of the accident, the insured held a policy with Security National Insurance Company.  Unfortunately, the insured’s license was expired at the time of the accident.  The insured was named as a defendant in a tort claim brought by the other driver in the accident.  He made a claim for defence and indemnity from the insurer in respect of that action.  The insurer denied coverage on the basis that the insured had been driving with an expired license.

Driving without a valid license is a strict liability offence.  The insured argued the defence of due diligence, which required establishing he reasonably believed in a mistaken set of facts that, if true, would render the act or omission innocent; or took all reasonable steps to avoid the particular event. 

The insured’s license expired on January 27, 2020.  In late 2019, he had tried without success to book a road test required for renewal.  He eventually booked a test on February 18, 2020.  When he attended for his test, he was told to wait in his car.  No one came out to speak with him.  He subsequently learned his test had been cancelled by the examiner six minutes before the scheduled start time, with no explanation given.  Shortly thereafter, province-wide shutdowns began due to the COVID-19 pandemic.  In March 2020, the provincial government suspended the expiration of licenses.  The government’s website indicated that if a motorist had booked a road test prior to the expiry of their license, they may be able to have an extension of their license validity until their new road test date.

The insured provided sworn evidence that he believed his license expiration had been tolled during this time.  He continued to renew his insurance and pay his premiums.  He made further unsuccessful attempts to schedule road tests in 2020 and 2021.  He believed his license was still valid at the time of the accident in July 2021.  The Court found this belief to have been reasonable, though mistaken, and found the insured had acted reasonably by attending for a road test in February 2020 and attempting to schedule further road tests in 2020 and 2021.  The Court found the insured had made out the defence of due diligence and was entitled to coverage despite the breach.

In the alternative, the Court found the insured was entitled to relief from forfeiture. 

Section 29 of the Insurance Act, R.S.O. 1990, c. I.8, grants the Court discretion to grant relief from forfeiture in respect of an insurance policy where the Court considers such forfeiture inequitable.

The Court held that relief from forfeiture provisions are to be construed broadly, and given a fair, large, and liberal interpretation.  In the specific context of insurance disputes, relief from forfeiture is intended to prevent hardship to insureds where there has been a failure to comply with a condition of the policy and leniency with respect to strict compliance will not result in prejudice to the insurer.

The Court considered three factors in granting relief from forfeiture.  First, the Court considered the insured’s conduct, including that he had continued to pay his premiums, he held a reasonable but mistaken belief that his license expiry was suspended, he cooperated with the insurer following the accident, and he appointed counsel in the tort action to avoid prejudice to the insurer should it take over his defence.

Second, the Court considered the gravity of the breach, including that the insured was an experienced driver and able to drive safely, the breach was borne of an honest misunderstanding, and the expiry had occurred only 34 days before the government’s suspension of license expiries.

Lastly, the Court considered the disparity between the value of the property forfeited and the damage caused by the breach.  The insurer had been made a party to the tort action already, the litigation was in its early stages, and the insured had retained counsel to conduct his defence while he sought coverage.  If denied relief from forfeiture, the insured would suffer a loss of $800,000.00 in insurance coverage, defence costs, and exposure of his assets.  The Court found the disparity to be great, and to weigh in favour of relief of forfeiture.

This case was digested by Mollie Clark and edited by Steven W. Abramson.  If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].