The Court of Appeal for Ontario held that a Minnesota tortfeasor with only $500,000 liability limits is an “inadequately insured motorist” under the Family Protection Endorsement (OPCF 44R) in Ontario, where the 44R limits are $1 million.
Date Case Heard: June 21, 2017 | Full Decision [PDF]
The plaintiffs were injured in a motor vehicle accident while in Minnesota when their motorcycle was struck by a self-insured State of Minnesota-owned truck, operated by a state employee. The plaintiffs retained Minnesota counsel and sued the State of Minnesota for damages.
Even though Mr. Hartley’s injuries warranted damages in excess of US$500,000 dollars, he settled the action for only US$500,000, which was the maximum the State of Minnesota would pay for compensation for property loss and personal injury caused by a state employee acting in the course of his or her employment. The settlement was inclusive of legal fees and disbursements. After legal costs were accounted for, Mr. Hartley was left with approximately CAD$386,500.
He then claimed the difference from Security National under his Ontario policy and, more specifically, under his OPCF 44R, which provided underinsured coverage of up to $1 million. The insurer denied the claim on two grounds: Firstly, the insurer claimed that Minnesota was not an “inadequately insured motorist” within the meaning of OPCF 44R but rather the shortfall in recovery was the result of a statutory immunity. Secondly, the insurer claimed that U.S. legal fees were not recoverable under the OPCF 44R.
The motion judge ordered in favour of the plaintiffs on both issues.
The Court of Appeal agreed with the motion judge that Minnesota was an “inadequately insured motorist” but disagreed that the legal fees were recoverable. The Court of Appeal found that the language in the OPCF 44R states that “the identified owner or identified driver of an automobile for which the total motor vehicle liability insurance or bonds, cash deposits or other financial guarantees as required by law in lieu of insurance, obtained by the owner or driver is less than the limit of family protection coverage …” [Emphasis added.]
The Court explained that the phrase “other financial guarantees as required by law in lieu of insurance” would include a legislated obligation by an uninsured state to indemnify its employees. As such, the shortfall created between what Mr. Hartley is “legally entitled to recover” in damages and the limits on damages provided by the State of Minnesota triggers a right of indemnity under OPCF 44R.
With respect to legal fees, the Court found that special damages could not provide compensation for costs incurred in securing compensatory damages as it would undermine the contractual agreement between the parties. In light of this, the legal fees were not recoverable under the OPCF 44R.
Read the full decision [PDF]
