The Ontario Superior Court has ruled that the Ontario’s Motor Vehicle Accident Claims Fund – which compensates people injured in accidents in which no auto insurance exists to respond to the claim – cannot pursue litigation against an insurance broker after the Fund had failed to commence arbitration on time.

In an online post, Aaron D. Atkinson of Harper Grey LLP discussed a successful bid to have the Fund’s claim against insurance broker McLarens Canada and its principal, Zurich Insurance Co., dismissed.

Fahmeeda Begum was struck by an uninsured driver in November 2008. Begum claimed she was not covered under any other insurance policy. As a result, she was eligible for benefits from the Fund.

A private investigator retained by the Fund learned that Begum appeared to have a policy with McLarens Canada, an insurance broker. The Fund wrote to McLarens in July 2009, indicating that Begum appeared to have access to benefits through McLarens' principal, Zurich Insurance. The Fund also stated: "please consider this our formal Notice of Dispute."

The formal Notice of Dispute starts the arbitration process under Ontario regulations.

McLarens was slow to respond. The Fund did some follow-up investigation, and the one-year time period for commencing the arbitration expired in July 2010.

The Fund subsequently learned that Begum's husband was insured by Zurich, and Begum had access to his insurance. The Fund then commenced an action against Zurich Insurance Co. and Begum.

Zurich responded with a summary judgment motion, arguing the Fund was prohibited from commencing a legal action because the arbitration process had been commenced.

The court agreed, concluding that the Fund could not pursue litigation simply because it missed the time limit for arbitration through its own inaction. As a result, the court dismissed the Fund's action.