$1 M Underinsured Endorsement Must Respond in Addition to $1 M Liability Coverage


The post below has been revised to correct an error that appeared in the original version. Colleen Morrison was both the owner and operator of her car; the earlier post had identified her only as owner and her husband as operator. Our apologies.

In Gostick v. Morrison, Madam Justice Eva Frank of the Ontario Superior Court ruled that a $1 million OPCF-44R underinsured endorsement on an auto policy had to respond to a series of claims, even though the $1 million liability coverage in the same policy had also been triggered by one of those claims. Thus, the same policy will now be required to pay up to $2 million as a result of one accident.

The injured parties were a man named Paul Ingleson and his wife’s two children. They were hurt while occupants of a car owned and operated by the wife, Colleen Morrison, and insured by Royal & SunAlliance. Their car was struck by an uninsured vehicle, operated by an impaired driver, which had crossed the centre line of a highway.

The most seriously injured plaintiff was Travis Morrison, one of the two children in the Morrison car.  He had not been wearing a seatbelt. Justice Frank said that this amounted to negligence on the part of the driver, Ms. Morrison.

Royal’s liability coverage was responding to Travis’s claim against Ms. Morrison and Justice Frank noted that the $1 million limits would be paid to Travis under that coverage. This meant that the only source of recovery for the other claimants was the underinsured motorist coverage in the Royal policy.

That coverage was also $1 million. Section 4 of the underinsured endorsement limits the insurer’s liability to the amount by which that coverage exceeds the total liability limits of the underinsured motorist and of any person jointly liable with that motorist.

Royal argued that because it was providing $1 million in liability coverage under Colleen Morrison’s policy, that exhausted the insurance money available to satisfy these claims (since the difference between the underinsured limits and the liability limits available to Colleen Morrison, persons jointly liable with the underinsured motorist, was zero).

However, Justice Frank rejected Royal’s submission and ruled that the full amount of the underinsured limits was available to the claimants other than Travis, on the assumption that the liability limits would be paid towards Travis’s claim. Thus, Royal would be liable to pay up to $2 million in total, even though the coverage that had been purchased was only $1 million.

Justice Frank’s decision hinged on her conclusion that the provision in the endorsement, limiting coverage to the difference between the underinsured limits and the total of all liability insurance limits of the inadequately insured motorist and of any person jointly liable with that motorist, is ambiguous and must therefore be construed against the insurer. She noted that the joint liability provision would not apply to any of the plaintiffs other than Travis. She also said that the underinsured endorsement “does not provide that family members are to be considered as a unit”.

Since Royal’s liability coverage was responding only to Travis’s claim and the underinsured coverage was responding only to the claims of the other plaintiffs, Justice Frank felt that this was a basis for treating the two sets of claims separately and finding that different parts of the policy should respond to each.

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