The Volunteer Defence
SUMMARY: This article examines the viability of the "volunteer defence" under Canadian law. The volunteer defence may be raised by defendants in a subrogated action in order to challenge the right of an insurance company to seek recovery for a loss paid to an insured under a policy. As the name suggests, the volunteer defence alleges that an insurance company has made voluntary payments to its customer without any obligation to do so under the policy or in law. As the argument goes, the payment to the
insured is essentially a "gift" rather than a payment of indemnity under the policy. The purported effect of such a payment is that the insurer remains a 'stranger' to the loss and so does not obtain the right to subrogate against the defendant. By questioning the insurer's motives for its payments to its insured, a defendant may also argue that it is entitled to the claims handlers' and adjusters' files which would otherwise be irrelevant in the subrogated action.The article concludes that defendants should not be permitted to bring into question the rationale or justification for an insurance company's decision to pay an insured's claim or obtain production of the subrogating insurer's claims file on that issue. Subrogation counsel should be alert to situations where this defence is raised unmeritoriously and take the appropriate steps to preclude this defence from proceeding.
