Plaintiffs Who Settle for Less than Tortfeasor's Limits May Not Pursue Underinsured Claims

A claim against an insurer pursuant to the underinsured provisions of the policy has been rejected since the plaintiffs settled against the tortfeasor for less than his limits.

In Kovacevic v. ING Insurance, 2015 ONSC 3415 (S.C.J.), the plaintiffs were injured in 2004 in a motor vehicle accident in Florida.  At the time, the plaintiffs were insured by ING; the policy had a $2 million limit and included the OPCF 44R - Family Protection Endorsement.  The Florida defendant had a policy of insurance with a $1 million limit.  The insurer, Lincoln General, elected to go into a "voluntary solvent run-off" in 2009 which resulted it in ceasing to write new policies but it continued to pay its existing obligations and liabilities.  There was no evidence that Lincoln had become insolvent at the date of the settlement or thereafter.

In 2010 the plaintiffs settled their Florida action for $300,000 without ING's knowledge or consent and then sought to recover under their own policy's underinsured driver provisions.  ING brought a motion for summary judgment.  The plaintiffs argued that settling at less than the policy limits did not disentitle them to recovery under the OPCF 44R.  They also argued that the case was unique as the possibility of Lincoln becoming insolvent meant the limits of the policy were unavailable and a settlement for less than the limits was provident.

Justice MacKenzie granted summary judgment and dismissed the claim.  The plaintiffs were not entitled to settle the Florida action for less than the limits then pursue an underinsured claim.  The claim that Lincoln was not solvent or that the policy limits were not available was not accepted.