Unfortunately, I believe that what has been reported is common practice that has been going on for some years. In normal circumstances if an accident involved an uninsured driver/rider the innocent party claims from the Motor Insurers Bureau, I'm guessing that if the MIB find an in force policy on the vehicle the claim will be made from that policy.
I think it operates basically the same way as if you have your vehicle stolen and any claims for damage could be made against your insurance.
Even if the new owner had taken out insurance it would not technically be valid as there was already a policy in force and you cannot have two policies on one vehicle.