[Addendum: This decision was upheld by the Court of Appeal on August 21, 2009.]
Ontario auto insurers might be surprised to learn that the Insurance Act and the standard auto policy do not require persons claiming against the uninsured motorist coverage to pursue anyone whose negligence might have contributed to the plaintiff’s injuries or “to pursue anybody at all; they require that the insured person simply submit the claim to the insurer and the insurer will pay”.
So said Justice Barry MacDougall in Loftus v. Robertson et al. in a decision released last Friday.
The plaintiff had been injured while driving her car, which was insured by Security National. That car was involved in a collision with a car driven by one Robertson, who was uninsured. At the time of the accident, Robertson was being chased by a member of the Peterborough Lakefield Community Police Services, who was driving a police cruiser.
The plaintiff sued only her insurer, Security National, under its uninsured motorist coverage. Security National brought third party proceedings against the City of Peterborough, alleging that the negligence of the police officer caused or contributed to the collision and to the plaintiff’s injuries.
In this Rule 22 “special case” motion, Security National asked the court to determine the following question:
Assuming negligence on the part of the Third Parties [the police], or any of them, caused or contributed to the injuries and damages sustained by the Plaintiff, is Security National liable to make any payment to the Plaintiff pursuant to the coverage required under s. 265 of the Insurance Act, R.S.O. 1990, c. I.8 ?
The genesis of the dispute was s. 2 of Regulation 676 under the Insurance Act (the “Uninsured Motorist Coverage Schedule”). Paragraphs 2(1)(a) and (c) [the judgment mistakenly refers to subparagraph 2(1)(b), but that paragraph has been repealed] of the regulation read as follows:
2. (1) The insurer shall not be liable to make any payment,
(a) where a person insured under the contract is entitled to recover money under any valid policy of insurance, other than money payable on death, except for the difference between such entitlement and the relevant minimum limits determined under clause (a);
(c) where the person insured under the contract is entitled to recover money under the third party liability section of a motor vehicle liability policy.
As noted above, it was assumed, for purposes of the motion, that negligence on the part of the police had caused or contributed, to some degree, to the plaintiff’s injuries.
Security National relied upon a decision of the Court of Appeal in Barton v. Aitchison (1982), 39 O.R. (2d) 282 (C.A.), for the proposition that “where there is more than one tortfeasor at fault with respect to an accident giving rise to injuries and damages and at least one of those tortfeasors is insured under any valid policy of insurance which will respond to the claims arising out of the accident, the insured person is prevented from suing his own insurer under the s. 265 coverage [uninsured motorist coverage] even if another of the tortfeasors is uninsured. The insured person must recover his or her damages from the insurer of the insured tortfeasor.”
However, Justice MacDougall concluded that “under s. 265 of the Insurance Act [which deals with uninsured motorist coverage], there would be no obligation on the plaintiff to sue the alleged tortfeasor, i.e., the third parties in this case.” To hold otherwise, he said, would “render the mandatory uninsured coverage as ‘illusory and worthless’.”
Accordingly, His Honour answered “yes” to the question posed on the motion and quoted above.
In cases in which the plaintiff claims against his or her own insurer, under the uninsured motorist coverage, the insurer commonly takes the position that it has no liability if there is a tortfeasor whose negligence contributed to the plaintiff’s injuries and who is insured under an auto policy. This frequently leads to the plaintiff joining defendants whom he or she would not otherwise have sued, just to protect against the insurer’s argument that failure to do so is fatal to coverage under the uninsured motorist coverage.
If Justice MacDougall’s decision stands, plaintiffs (particularly those whose damages will be worth less than the $200,000 limit of uninsured motorist coverage) won’t bother suing marginal tortfeasors any longer. So long as they can establish a legal right of recovery against the uninsured motorist, they can now sue only their insurer and recover in full.
An issue which was not discussed in Loftus but which will now take on much greater importance is whether an uninsured motorist insurer, in the position of Security National in this case, can claim contribution from tortfeasors other than the uninsured motorist. Section 265(6) of the Insurance Act expressly provides for a right of subrogation on the part of the uninsured insurer “against any other person or persons responsible for the use or operation of the uninsured or unidentified automobile”. So, in the present case, Security National would have a statutory right to claim over against the uninsured driver, Robertson, for any amounts that it has to pay to the plaintiff.
But what about the claim over against the City of Peterborough, based on the alleged negligence of one of its officers? This claim for contribution or indemnity by Security National is not one that is authorized by s. 265(6) of the Act. Security National is not a “tortfeasor” within the meaning of the Negligence Act, so a claim for contribution or indemnity under s. 2 of that statute is not available to an uninsured insurer.
The only basis that we can think of for Security National’s claim is one of subrogation to the rights of the injured plaintiff against all negligent tortfeasors. But given that the liability of the uninsured insurer is based on s. 265 of the Insurance Act and that that section says only that the insurer can maintain a subrogated claim against the uninsured driver, we wonder whether a broader right of subrogation in favour of the insurer making the payment actually exists.
So far as we can ascertain, this issue has not yet been adjudicated upon. However, in the wake of Loftus, there will inevitably be an increase in the number of third party claims by uninsured insurers, so the question will probably come before the courts before long.