Our lawyers have worked through the maze of complex litigation and coverage issues, managed the class action juggernaut, and represented employees of insurers that come under attack by plaintiff`s litigation. Some of the problems we face are front page news, most are not. They are all problems that are important to our clients, and to us.
The Court of Appeal for Ontario has 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.
In Hartley v. Security National, the plaintiffs were injured in a motor vehicle accident while touring on a motorcycle in Minnesota. The accident occurred when the plaintiffs’ 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 payable by Minnesota to a tort claimant in the circumstances. The settlement was inclusive of legal fees, including a 22 per cent contingency fee, 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. Secondly, the insurer claimed that U.S. legal fees were not recoverable under the OPCF 44R.
The motion judge found for 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.
“Inadequately insured motorist”
The evidence was that the Tort Claims Act inMinnesota provides that the State will pay compensation for property loss and personal injury caused by a state employee acting in the course of his or her employment. However, the Act contains a $500,000 cap on the amount that can be claimed by an individual and a $1,500,000 cap on the total that is payable “for any number of claims arising out of a single occurrence”. Mr. Hartley’s settlement agreement with Minnesota contained the following provision:
The parties to this Settlement Agreement agree and acknowledge that the amount paid to Plaintiff Glen Hartley and his counsel, (i.e., [US]$500,000.00) is the maximum amount Glen Hartley can recover against State Defendants pursuant to Minnesota law, including Minn. Stat. §3.736.
Security National raised three arguments for refusing Mr. Hartley’s claim for the shortfall left after his settlement agreement:
Minnesota was not underinsured, but self-insured, and therefore underinsured coverage does not apply.
The shortfall in recovery was not the result of underinsurance, but the result of a statutory immunity.
Even if a self-insured state enjoying statutory immunity can be an “inadequately insured motorist”, it is not accurate to say that Minnesota is underinsured because Minnesota offers single occurrence coverage up to US$1,500,000 that exceeds the CAD$1,000,000 coverage ceiling payable under OPCF 44R. Security National claimed that its maximum liability is zero under the terms of OPCF 44R.
The Court of Appeal rejected all three arguments.
First, the language in the OPCF 44R was clear:
“inadequately insured motorist” means
(a) 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 held 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 by paying compensation for tortious damage caused by those employees.
Second, the Court of Appeal held that the Tort Claims Act does not remove Minnesota’s liability: It limits the damages that can be collected from Minnesota:
Instead of assisting Security National, the cap on damages produces a shortfall between what Mr. Hartley is “legally entitled to recover” in damages, and what he is entitled to receive, thereby triggering a right of indemnity under OPCF 44R.
Finally, The Court of Appeal dismissed the insurer’s argument that the $1.5 million cap represents the “total of all limits” available to the claimant for the purpose of section 4 of the OPCF 44R:
When the words “the total of all limits of motor vehicle liability insurance, or bonds, or cash deposits, or other financial guarantee as required by law in lieu of insurance, of the inadequately insured motorist” in s. 4 are given their ordinary meaning in context, it is clear that they refer to the funds available to the claimant bringing the claim.
As Mr. Hartley’s claims were limited to $500,000, there was a shortfall within the meaning of section 4 of the OPCF 44R.
Section 3 of the OPCF 44R requires the insurer to indemnify the insured for the shortfall in “compensatory damages in respect of bodily injury to or death of an insured person arising directly or indirectly from the use or operation of an automobile” [emphasis added].
The motion judge found that the legal fees were not “compensatory damages”, but held that the fees could be recovered from the insurer as special damages. The Court of Appeal disagreed:
To use the vehicle of special damages to provide compensation for costs incurred in securing compensatory damages undermines the contractual agreement of the parties.
The Superior Court of Justice recently released an important decision finding full indemnity costs payable in a coverage case.
In the underlying action, a young boy was severely injured by a car after his father dropped him off in a parking lot. The boy (via his litigation guardian) and the boy’s mother (via the Family Law Act) sued the father for damages. The father’s insurer found a duty to defend and the insurer’s counsel represented him at trial. At trial, over $900,000.00 in damages were awarded. Following the trial, the father’s insurer denied coverage.
The mother and boy brought a claim against the father’s insurer under section 258(1) of the Insurance Act, which allows parties to bring a claim to enforce judgment against insurers. At the summary judgment motion, the court found that there was coverage.
The significance of Hoang v. The Personal Insurance Company is the court’s determination on costs. The court found costs payable to the mother and boy on a full indemnity scale, rather than the usual partial indemnity scale.
The court rationalized the full indemnity on the basis that the insurance premium is presumed to reflect the insurance company’s risk. It would be unfair and burdensome to make customers pay a premium plus legal fees in order to obtain the coverage they purchased. If the insurer chooses to attempt to reduce its risk by engaging in coverage litigation, it should be made to fully compensate the successful party if it losses. Ultimately, the court ordered the insurer to pay full indemnity costs at $72,000.00.
This decision marks a possibly new exception to the general policy of awarding partial indemnity costs to successful parties. It is something that both coverage counsel for insurers and policy holders need to keep in mind moving forward, as denying coverage under a policy now can apparently be very costly.
In a decision on a preliminary issue released September 7, 2017, Vice Chair Trojek of the LAT held that a catastrophically impaired Applicant missed the two year limitation period to dispute the Insurer’s refusal to pay housekeeping and attendant care benefits, coming to the same conclusion ADR Chambers came to in a similar case last year (Mayo v. Economical Mutual Insurance Co.,  O.F.S.C.D. No. 342 (QL).
In S.T. v. Economical, the Applicant was involved in a motor vehicle accident on September 12, 2008. Following the accident, the Applicant received various benefits under the SABS, including housekeeping and attendant care benefits. Economical sent the Applicant an OCF-9 near the two year mark advising that no further housekeeping and attendant care benefits would be paid after the 104-week mark. The Applicant submitted an Application for Determination of Catastrophic Impairment almost seven years post-accident. After appropriate assessments were completed, she was deemed to be catastrophically impaired by Economical. After this the Applicant submitted further expenses for housekeeping and attendant care, which were also denied. The Applicant did not dispute the initial denial of housekeeping and attendant care until September 29, 2016.
Various arguments were raised on behalf of the Applicant; however, the main arguments were that there can be no denial prior to entitlement and that the limitation period could not begin to run until the Applicant discovered she was catastrophically impaired . The Applicant argued that since there is no limitation period for applying for catastrophic designation or for disputing an insurer’s denial of a catastrophic application, to accept Economical’s position would be to accept that insurers can create a time limit/limitation period for when an insured must apply for catastrophic impairment determination, which goes against recent decisions such as Guarantee v. Do and Machaj v. RBC.
Economical argued that the Do and Machaj decisions were not relevant to the issue in this case because it was the specific benefits claimed that were denied -- not catastrophic designation. The Vice Chair agreed and found that in keeping with the Court’s decisions in Sietzema, Haldenby, and Turner, that the objective of consumer protection must be balanced against other objectives, such as the finality and certainty that limitation periods provide. The Vice Chair also confirmed that the principle of discoverability does not apply in the scheme of statutory accident benefits.