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.

The Limitation Period to Commence a Claim under OPCF-44R

The decision in Schmitz(Litigation guardian of) v. Lombard General Insurance Co. of Canada, 2014 ONCA 88 (C.A.) is an important decision on when the limitation period begins to run in a claim under form OPCF-44R, for underinsured motorist coverage.

This matter concerned a motor vehicle accident that occurred on July 19, 2006. The plaintiff had a policy of insurance which included a provision for underinsured motorist coverage. The plaintiff commenced a claim against the defendant driver in June 2007 and a claim against his insurer for underinsured motorist coverage in June 2010. The plaintiff’s insurer brought a motion to dismiss the plaintiff’s claim on the basis that it was commenced after the expiry of the 1 year limitation period set out in section 17 of the OPCF-44R. The plaintiff took the position that section 17 did not apply and the 2 year limitation period set out in section 4 the Limitations Act overrode section 17 of the OPCF-44R. The motions judge accepted the plaintiff’s argument and dismissed the insurer’s motion. The plaintiff’s insurer appealed this decision.

 On appeal, the plaintiff’s insurer conceded that the 2 year limitation period in the Limitations Act applied and overrode the 1 year limitation period in the OPCF-44R. Instead, the insurer asserted that the limitation period began to run when the plaintiff knew or ought to have known that their claim exceeded the Defendant’s policy limits, embodied under section 15 of the OPCF-44R. The insurer argued that this section was not overridden by the discoverability provision under section 5 of the Limitations Act.

 
The Ontario Court of Appeal rejected the insurer’s argument. The court concluded that once it was accepted that the 2 year limitation period set out in the Limitations Act applied so did the discoverability provisions in section 17 of the Act. Turning to discoverability, the court held that this loss was only discovered by the plaintiff after a formal request for indemnification was made to the insurer and the insurer failed to indemnify the plaintiff. Given this finding, the court held that the 2 year limitation period did not begin to run until the day after the demand for indemnification was made to the plaintiff’s insurer under the underinsured motorist provision of the policy.

Limitation Periods in Actions Under the OPCF

Roque v. Pilot Insurance Company, 2012 ONCA 311 (C.A.)

The plaintiff was injured in an automobile accident in 1996. He commenced an action against the defendant driver in 1998 for $1.75 million.  He commenced an action against his own insurer in 2002.   Section 17 of the OPCF provides an.action against one's own insurer under the underinsured provisions of the policy must be commenced within one year from when the claimant knew or ought to have known the quantum of claims exceeds the defendant's motor vehicle liability limits. The plaintiff argued the limitation did not begin to run until his damages were quantified by settlement or judgment.  This interpretation had previously been accepted in Hampton v. Traders General Insurance Company (1996), 27 O.R. (3d) 285 (Gen. Div).  On the insurer's motion for summary judgment, the motion judge dismissed the action.  The Court of Appeal dismissed the appeal, overruling Hampton.  Justice Juriansz preferred the reasoning of Master Dash in McCook v. Subramaniam (2008), 172 A.C.W.S. (3d) 344 (S.C.) at para. 5:

The plaintiff’s case runs from when he has a body of evidence accumulated that would give him a “reasonable chance” of persuading a judge that his claims would exceed $200,000.

Roque had a DAC, medical reports and an economic loss report going back to 1998 and more than two years passed after he knew or ought to have known his claims exceeded $200,000. As a result, the action was statute barred. 

The Court did not accept the plaintiff`s submission that applying s. 17 would amount to a multiplicity of proceedings, since s. 258.4 of the Insurance Act requires an insurer to advise of the defendant`s policy limits.  Where an insurer fails to comply, the Court stated it would be prudent for a plaintiff to commence an action against its own insurer.

This decision should help to provide greater certainty with respect to the timing for claims under the underinsured provisions of the motor vehicle policy. 

OPCF 44R - Family Protection Endorsement

The Court of Appeal recently affirmed a lower court decision on the OPCF44R.

In Van Bastelaar v. Bentley, [2011] O.J. No. 4666 (C.A.), the plaintiffs were concerned that the defendant's $1,000,000 policy would be apportioned between four injured parties and there would be a shortfall. As a result, they added their own insurer pursuant to the inadequately insured motorist provisions of their policy. Their policy had a Family Protection Endorsement with limits of $1,000,000. The key provision read as follows:

The insurer's maximum liability under this change form, regardless of the number of eligible claimants or insured persons injured or killed or the number of automobiles insured under the Policy, is the amount by which the limit of family protection coverage exceeds the total of all limits of motor vehicle liability insurance, or bonds, or cash deposits, or other financial guarantees as required by law in lieu of such insurance, of the inadequately insured motorist and of any person any person jointly liable with that motorist.

The motions judge held that "An underinsurer's obligation to pay does not arise until the total amount of insurance held by the tortfeasor at the moment of the accident is less than the family protection coverage liability limit." He concluded that since "the policies of the parties are unevenly matched, so therefore, the underinsurer had no exposure to liability".

The Court of Appeal affirmed the decision.

- Tara Pollitt

Unidentified Motorist - Corroborating Evidence

In our post of July 27, 2010, we blogged about the case of Pepe v. State Farm Mutual Automobile Insurance Co., [2010] O.J. No. 2138 (S.C.J.) and whether a passenger in an insured’s motor vehicle was an “independent witness” who can corroborate the insured’s evidence concerning the involvement of an unidentified motorist for the purposes of the OPCF 44R Family Protection Endorsement. The motions judge held that the passenger could corroborate the insured’s claim for the purpose of OPCF 44R coverage, despite the fact that she was the insured's girlfriend and was also suing State Farm for damages caused by an unidentified driver.

The Court of Appeal has upheld the motions judge's decision.

Doherty J.A. reviewed the history of requiring corroboration and cited Chief Justice Dickson, in Vetrovec v. The Queen, [1982] 1 S.C.R. 811 at 826, for identifying the rationale for a corroboration requirement:

"The reason for requiring corroboration is that we believe the witness has good reason to lie. We therefore want some other piece of evidence which tends to convince us that he is telling the truth."

Doherty J.A. held that State Farm’s assertion that it is the witness who must be independent, in the sense of neutral to the outcome, was wrong. The independence requirement in the context of corroboration has always referred to the independence of the evidence and not to the neutrality of the witness. The witness’s neutrality or lack thereof is relevant to the ultimate credibility of the witness’s evidence, which is for the trial judge to assess.

Definition of "Struck by" or "Hit by" in Auto Insurance

The Court of Appeal for Ontario has decided that coverage under one's own policy for being "struck by" or "hit by" an unidentified automobile includes walking into an unnoticed steel pole protruding from a parked truck. Lewis v. Economical Insurance Group, [2010] O.J. No. 3158 (C.A.).

The facts are described as follows: "On a spring day in 2003, Bonnie Lewis walked out of a variety store and struck her head on a steel pole protruding from a truck parked the wrong way on the street in front of the store. The pole was unmarked, grey and nearly invisible. Ms. Lewis did not see the pole until she hit it. The pole struck her above her right eye near her temple. She fell to the ground, unconscious. She suffered a serious head injury, which has left her cognitively impaired."

Since the truck could not be identified, Ms. Lewis sued her own insurance company for damages for personal injuries. Both her automobile policy and the OPCF Family Protection Endorsement, which was additional insurance she had purchased, provided coverage for personal injuries resulting from an accident involving an unidentified or uninsured automobile. As Ms. Lewis was not an occupant of an automobile when she was injured, she was entitled to coverage only if she was "struck by" or "hit by" an unidentified automobile.

A motions judge concluded that Ms. Lewis was not "struck" or "hit by" the truck, or the pole that protruded from it, because the truck was not moving at the time. Instead, it was Ms. Lewis who struck or hit the pole.

The Court of Appeal concluded otherwise and finds that she is entitled to coverage.

Laskin J.A. added that "my interpretation of these words [struck or hit by] would not open the floodgates to injury claims by persons who walk into unidentified parked cars. This is a case about coverage, not liability or negligence. If the owner or driver of a parked car was not negligent, the claimant would have no legal entitlement to damages."

Whether the plaintiff is now entitled to damages "depends on her being able to prove that the unidentified owner or driver of the truck was negligent."

It seems that the Court is saying that if the plaintiff is not entitled to damages then it should be determined on the issue of negligence and not coverage. Coverage should be interpreted broadly whereas negligence must be proven strictly.

Unidentified Vehicle: The Corroborating Evidence Rule

Is a passenger in an insured's motor vehicle an "independent witness" who can corroborate the insured's evidence concerning the involvement of an unidentified motorist for the purposes of the OPCF 44R Family Protection Endorsement? Is the passenger an "independent witness" if the passenger has also sued the insurer under the unidentified coverage provisions and therefore has an interest in the outcome?

D.A. Wilson J. recently said yes to these questions in Pepe v. State Farm Mutual Automobile Insurance Co., [2010] O.J. No. 2138 (S.C.J.).

Sections 1.5(c) and 1.5(d)(i) of the OPCF 44R, known as the Family Protection Endorsement, read as follows:

(c) where an eligible claimant alleges that both the owner and driver of an automobile referred to in clause 1.5(b) cannot be determined, the eligible claimant's own evidence of the involvement of such automobile must be corroborated by other material evidence; and

(d) "other material evidence" for the purposes of this section means (i) independent witness evidence, other than evidence of a spouse ... or a dependent relative ...; or (ii) physical evidence indicating the involvement of an unidentified automobile..


Wilson J. found that: "It is clear that the intention of this section is to limit the ability of individuals to make claims against their OPCF 44R policies for claims involving unidentified vehicles unless there is independent evidence to corroborate the involvement of a vehicle whose driver or owner cannot be ascertained. Further, the individual who corroborates the evidence of the claimant cannot be the spouse or a dependant of the claimant." (para. 10)

In the instance before Wilson J., the independent witness was a passenger in the plaintiff's vehicle and a girlfriend at the time of the accident but not at the time of the motion. Wilson J. concluded that this witness did not fit into the narrow class of persons excluded, namely a spouse or relative, and therefore she was an independent witness who could provide corroborating evidence.

It would seem that allowing a passenger, who has also sued the insurer under the unidentified coverage provisions and therefore has an interest in the outcome, to be the witness required under the Endorsement, defeats the intent of having "independent" corroborating evidence. On the other hand, it seems a correct finding on a plain and narrowly construed interpretation of the Endorsement's wording.

OPCF 44: McGrath v. Arshad, [2008] O.J. No. 5771 (S.C.J.)

This decision clarifies the underinsured provisions of the OPCF 44. The at fault driver, Arshad, had $200,000 in liability insurance. There were multiple plaintiffs, whose claims exceeded $200,000 and would therefore share pro rata. One of the plaintiffs, McGrath, had purchased $2,000,000 in extra insurance but his pro rata share was only $20,000. His insurer took the position that its obligation to pay started at $200,000. The court disagreed and held that the insurer was obligated to make up any shortfall between the actual amount the claimant received from the underinsured driver ($20,000) and his damages up to the OPCF limits ($1,800,000).

Walking into a parked auto is not being "struck" or "hit" by it

In Lewis v. Economical Insurance Group, [2009] O.J. No. 2853 (S.C.J.), Eberhard J. held that there is no coverage for walking into a parked car under the uninsured provisions of the Standard Automobile Policy (s. 265 Insurance Act) or under the Family Protection endorsement (OPCF 44R).

It seems to make sense.

The plaintiff suffered injuries when she struck her head on a steel pole that was protruding from a vehicle.

The defendant insurer brought a motion for summary judgment on the basis that (i) the plaintiff had failed to establish an unidentified vehicle had been involved or could not have been ascertained and (ii) that there is no coverage in any event under the uninsured provisions policy or under OPCF 44R. The insurer won the motion on the latter issue.

The wording of the OPCF 44R endorsement is that the plaintiff is only covered if the plaintiff is not "an occupant of an automobile who is struck by an automobile".

The wording of the policy is that the plaintiff is only covered "when not in an automobile ... if hit by an unidentified or uninsured automobile" (policy).

The Court held that the meaning of hit or struck is not ambiguous: the automobile did not hit or strike the plaintiff pedestrian. The pedestrian walked into the automobile.

Here are paragraphs 9 and 10 of the Court's endorsement:

"This is quite unlike the circumstance of being hit/struck by something hit by an automobile or falling out of a moving vehicle as it is the movement of the vehicle that applies the force that gives rise to the hit/strike."

"It is also unlike the interpretation of "hit/struck" where a moving automobile created a peril which caused the insured to take evasive action which resulted in his injury. There, the visual impact of the automobile caused the injury. In the present case the Plaintiff did not see the pole and walked into it. Nothing about the automobile impacted upon the situation."