Adding an Insurer as a Defendant Rather than a Statutory Third Party

Can an insurer add itself as a defendant rather than as a statutory third party?

In Azad v. Dekran, 2012 ONSC 4257 (S.C.J.), the Personal insured the defendant and brought a motion pursuant to r. 13.01 to intervene as an added defendant.  It wished to allege that the accident did not occur or was staged and to crossclaim against its insured.  It preferred this route rather than being added as a statutory third party since s. 258(14) of the Insurance Act prohibits a statutory third party from taking a position incongruous to its insured.

Master Dash dismissed the motion, holding that it was not a proper use of r. 13.01.  One of the purposes of s. 258 is to permit an insurer to contest the plaintiff’s claim in a situation where it denies coverage.  The plaintiff’s action is not the appropriate forum to decide issues between the insured and insurer.  Any dispute could be decided in subsequent proceedings, including a proceeding to recover the statutory minimum paid to the plaintiff. 

Master Dash noted that if the accident was staged, the plaintiff would not be entitled to damages; on the other hand, if the trial court did award damages, it would mean there was a legitimate accident and there would be no basis for a crossclaim against the insured.  In addition, as a statutory third party, the insurer would have a right to discover its insured.

Master Dash refused to follow the decision in Esho v. Dekran, 2012 ONSC 3638 (S.C.J.), where the insurer was added as a defendant.  Now that there are conflicting decisions on this issue, perhaps it will be up to the Divisional Court to provide clarity.