Loss Transfer and the Fault Determination Rules

The Court of Appeal recently considered the interplay of the Fault Determination Rules in a loss transfer context.

In State Farm Mutual Automobile Insurance Co. v. Old Republic Insurance Co. of Canada, 2015 ONCA 699 (C.A.), there was a multi-vehicle collision in which a Pepsi truck rear-ended a Dodge, which in turn rear-ended a Nissan.  Old Republic insured the Pepsi truck and State Farm insured the Nissan.  The driver of the Nissan collected accident benefits from State Farm, which in turn sought to be indemnified by Old Republic under the loss transfer provisions of the Insurance Act.  The issue on appeal was whether the Pepsi truck was only responsible for the initial collision with the Dodge or whether it was responsible for the entire chain reaction.

The Court of Appeal held that the Pepsi truck (and its insurer, Old Republic) was 100% responsible only for the collision between it and the Dodge, not the entire chain reaction.    As a result, Old Republic was not required to indemnify State Farm for accident benefits paid to its insured.

The Court's interpretation helps to clarify an area in which there was previously conflicting lines of case law.