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October 2015

State Farm v. Old Republic Insurance, 2015 ONCA 699

The Ontario Court of Appeal has recently released a decision that will be widely applauded by the insurers of heavy commercial vehicles.

The Court of Appeal has clarified that only insurers of vehicles directly struck by heavy commercial vehicles will be entitled to indemnification through loss transfer while insurers of vehicles involved in a ‘chain reaction accident’ but not directly struck by the heavy commercial vehicle will have no recourse.

In November 2007, a Pepsi truck rear-ended a Dodge stopped near an intersection in Mississauga. The impact of this collision caused the Dodge to rear-end a Nissan, which was also stopped near the intersection. All of the automobiles were travelling in the same direction and in the same lane. The Pepsi truck was insured by Old Republic and the Nissan was insured by State Farm. The driver of the Nissan collected Accident Benefits from State Farm and, in turn, State Farm claimed indemnification by way of the loss transfer provisions of the Insurance Act from Old Republic. The main issue in this case was whether Old Republic must indemnify State Farm.

The Pepsi truck was 100% at fault only for the collision between it and the Dodge...

The Arbitrator and the Superior Court of Justice both reviewed the Fault Determination Rules and concluded that the Pepsi truck was 100% responsible for the incident — meaning the chain reaction — and that Old Republic must indemnify State Farm for the AB benefits paid out following the accident. Old Republic appealed this decision to the Ontario Court of Appeal.

The Court of Appeal concluded that the word "incident" as it appears in sub-clauses (a) and (b) of s. 9(4) can refer only to the collision identified in the particular sub-clause and not the entire chain reaction. The Pepsi truck was 100% at fault only for the collision between it and the Dodge and not for the collision between the Dodge and the Nissan. As a result, the appeal was allowed and Old Republic was not required to indemnify State Farm for the AB payments made.

This decision brings clarity to an area where there was conflicting case law and ought to simplify ongoing and future disputes.

For the full decision see the decision on the CanLII website.

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