The Ontario Court of Appeal has held that insurers were entitled to appeal the dismissal of their motion to amend their pleadings to add a civil fraud defence. The Court found that the refusal to permit the amendment was a final order, meaning the appeal properly lay to the Court of Appeal as of right.
In Natario v. RBC Insurance Company of Canada, 2026 ONCA 263, the plaintiff suffered devastating injuries in 2012 after falling through a hole in the attic floor of her friends’ home, leaving her paraplegic. Her claim initially alleged that she tripped on debris and fell down the stairs, but she later amended her pleading to state that she fell through an attic opening or unstable floorboards.
The homeowners were insured under a home insurance policy issued by RBC Insurance Company of Canada, whose obligations were later assumed by Aviva Insurance Company of Canada in 2016. For several years, the insureds maintained a version of events that denied the attic fall, apparently because of concerns about renovations carried out without a building permit. In 2019, they admitted that they had provided fabricated evidence during discoveries.
Aviva and RBC declined to indemnify the insureds on the basis that those misrepresentations materially breached the policy. At the same time, they continued to defend the action in order to manage exposure and minimize any potential judgment. That approach is consistent with an insurer’s practical role in protecting its interests while the coverage dispute is resolved.
The underlying action was later settled in 2021 by consent. The settlement required the plaintiff to sign a full and final release in favour of the insureds, while preserving her right to pursue the insurers under section 132 of Ontario’s Insurance Act. She was not required in the new proceeding to prove damages up to the $2 million policy limit, and she commenced that action in February 2022.
Leave to Amend Refused
In September 2025, the insurers moved in the Superior Court for leave to amend their statement of defence to add civil fraud based on the insureds’ false statements and the facts already pleaded. The motion judge dismissed the request on December 10, 2025, concluding that allowing the amendment would cause non-compensable prejudice to the plaintiff.
The plaintiff then moved to quash the appeal, arguing that the order was interlocutory and that any challenge should proceed to the Divisional Court with leave under section 19(1)(b) of the Courts of Justice Act, 1990. The insurers responded that the order was final because it prevented them from advancing a distinct substantive defence.
Court of Appeal Dismisses Motion
The Court of Appeal agreed with the insurers and dismissed the motion to quash, awarding them $5,000 in costs, including HST and disbursements. The Court held that the refusal to permit the civil fraud amendment was a final order because it permanently barred the insurers from relying on that defence.
The Court distinguished civil fraud from the policy-based and good faith defences already pleaded. It also noted that fraud must be specifically pleaded with sufficient detail to avoid surprise and to identify the material facts supporting the allegation.
The Court confirmed that civil fraud requires proof of a false representation, knowledge of the falsity or recklessness, reliance, and resulting loss.
Why It Matters
This decision is a useful reminder that insurers are entitled to pursue properly pleaded defences where the evidence supports them, particularly where an insured’s own misrepresentations may have affected the coverage landscape. It also confirms that orders finally foreclosing a substantive defence may be appealed as of right to the Court of Appeal.
Flaherty McCarthy LLP advises and defends insurers in complex coverage and fraud-related disputes, including cases where pleadings, privilege, and strategic defence positions are central to the litigation.
