| Commercial Auto Insurance - Material Changes in Risk |
The Ontario Court of Appeal recently confirmed that if an insured failed to disclose a material change in risk, the insurance company could reject a claim without having to void or cancel the policy. The case involved a company with a fleet insurance policy that had employed a driver who had a record for impaired driving. The driver was involved in a serious accident and the insurance company denied the claim. The Court of Appeal said that the situation was covered by the Standard OAP1 Policy. Section 1.4 of that policy says: "If you fail to meet your responsibilities, claims under this policy, with the exception of certain Accident Benefits, may be denied." The policy also says that the policyholder agrees "to notify us promptly in writing of any significant change of which you are aware in your status as a driver, owner or lessee of a described automobile. You also agree to let us know of any change that might increase the risk of an incident or affect our willingness to insure you at current rates." The court awarded costs against the plaintiff in the amount of $18,000.
As an insured, it may be difficult to determine what constitutes a material change in risk. Below are a few examples but it all depends on the type of policy and what is being insured.
- performance modifications to your vehicle
- storing hazardous products and materials at your location
- using your vehicle for commercial use while it is insured under a personal use policy
- selling products and services that are not part of your usual business
- expanding your operations significantly
- starting a small business in your home
This is in no way a comprehensive list. When in doubt, call your insurance broker.
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