Court of Appeal Comments on s. 132 of the Insurance Act

The Court of Appeal recently commented on s. 132 of the Insurance Act. Section 132 provides that a person who obtains a judgment against an insured person which has not been satisfied may recover that amount from the insured’s insurer.

In Walker v. Sovereign General Insurance Co., [2011] O.J. No. 4106 (C.A.), the Walkers obtained a judgment against Sun Shelters Industries Inc. for damages sustained in a parking lot slip and fall. Sun Shelters went bankrupt and could not pay the judgment, so the Walkers brought an action under s. 132 against Sun Shelters’ insurance company, Sovereign. Sovereign’s position was that it did not receive proper notice as required under the CGL policy and as a result was not required to defend the action or indemnify Sun Shelters or the Walkers.

The Court of Appeal held that notice of a claim can be given either by the insured or by a person on behalf of the insured. In this case, notice was given to Sovereign by a co-defendant. The Court noted that if notice is given by someone other than the insured, the person should have sufficient proximity to give adequate details of the claim:

36 Given its purpose and importance, if the notice is to be given for an insured instead of by the insured itself, the person giving it should have sufficient proximity to the claim to have knowledge of the information required by s. 3(a). Emshih was just such a person. It owned the property where the accident occurred; it was a defendant in the original action; and it cross-claimed against Sovereign's insured. In giving notice to Sovereign, Emshih was giving notice for Sun Shelters as contemplated by s. 3(a) of the policy.

Sovereign had actual notice of the claim and made a conscious decision not to defend. If the insurer had no knowledge of the claim, no opportunity to investigate or negotiate a settlement, it may be that the decision would be different.

- Tara