In Kozel v. The Personal Insurance Company, an Ontario driver had an automobile insurance policy with the appellant insurance company. The driver severely injured a motorcyclist in an automobile accident in Florida. The injured motorcyclist sued the Ontario driver. At the time of the accident, the driver was driving with an expired license, in breach of a statutory condition of her insurance policy.
The driver asked the Court to order the insurance company to defend her against the motorcyclist’s lawsuit under the liability coverage of her automobile insurance policy. The insurance company refused to defend the driver because she was in breach of the policy. The Court of Appeal considered whether the driver should be excused from her breach of the policy. The Court considered whether to grant “relief from forfeiture” under section 98 of the Courts of Justice Act (which states that “A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just”). The Court of Appeal differentiated between an incidental breach of the policy (“imperfect compliance”) versus a fundamental breach of the policy (a breach of a “condition precedent”), stating that if the driver’s failure to drive with a valid license was a breach of a “condition precedent”, she would not be entitled to “relief from forfeiture” under section 98.
The Court decided that the driver’s failure to have a valid license at the time of the accident was not a breach of a “condition precedent”. The Court considered:
- the conduct of the applicant
The Court found that the driver’s conduct was reasonable. Her license had expired on her birthday, which was four months before the accident. As soon as she discovered that her license had expired, she sought to renew it, which she did three days after the accident.
- the gravity of the breach
The Court found that driving with an expired license was not “grave” because it had no impact on the driver’s ability to drive safely or on the contractual rights of the insurance company.
- the disparity between the value of the property forfeited and the damage caused by the breach
The Court found that the disparity was “enormous”: the driver would lose $1,000,000 in insurance coverage. In contrast, the insurance company would not be prejudiced by the breach the insurance policy.
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