A recent decision requires a statutory third party to answer questions about why it denied coverage to its insured. In Lica v. Dhaliwal, 2015 ONSC 3888 (S.C.J.), State Farm denied coverage and added itself as a statutory third party. The plaintiff asked questions by written interrogatory requesting details as to why the insurer denied coverage. State Farm refused to answer and the plaintiff brought a motion, arguing he needed the information in order for him to claim underinsurance coverage from his own insurer under the OPCF 44R and to permit his insurer to assess its potential liability. State Farm argued that the main action was not the proper forum to decide coverage issues so the questions were improper.
Justice Price ordered State Farm to provide details of the denial of coverage. A court requires the information to determine whether State Farm's allegation the insured breached the conditions of his policy are borne out by the evidence. If the denial was justified, the plaintiff would have access to the coverage provided by his OPCF 44R endorsement. Justice Price held that where coverage has been denied, the court should determine whether an insurer must disclose the information and documents relating to its decision on a case by case basis, having regard to whether the documents are relevant, whether their disclosure would cause prejudice, whether they are protected by litigation privilege and whether that privilege, if it exists, has been waived.
Statutory Third Parties will have to carefully consider what must be disclosed as a result of the Lica decision.