An insurer may have an obligation to renew a motor vehicle policy even if the insured allows their AMA membership to lapse

Insured was entitled to coverage under the policy because membership in AMA was not a condition precedent to coverage and there was a reasonable expectation that the policy would be renewed on an annual basis.

Lafont v. Alberta Motor Assn. Insurance Co., [2011] A.J. No. 513, May 3, 2011, Alberta Court of Queen’s Bench, D.J. Manderscheid J.

The plaintiff insured sought indemnity under a policy issued by the defendant insurer or, alternatively, damages for wrongful termination of that policy in respect of a fire that destroyed the insured’s home and personal property.

The insurer denied that the insured was entitled to coverage under the policy and alleged that the policy had not been renewed and was no longer valid or in force as of the date of the loss. One of the main issues was whether it was a term of the policy that the insured had to be a member of the Alberta Motor Association at the time for renewal of the policy. The other main issue was whether it was a term of the agreement between the insurer and the insured that the policy would be automatically renewed on an annual basis unless reasonable notice to the contrary was provided.

The Court found that the insured was not informed that AMA membership was required to obtain the insurance when she purchased the policy or for continuing coverage. In any event, the Court found that there was no contract provision requiring AMA membership as a condition precedent. There was no provision in the policy and, accordingly, any agreement would be collateral and inconsistent with the policy and would therefore not apply. The Court also concluded that the insurer had an obligation to renew the policy because the parties had a reasonable expectation that the policy would be automatically renewed on an annual basis. Accordingly, judgment was entered in favour of the insured.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

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