Recent Articles tagged uninsured or underinsured from LexMonitor

Not “Quantum of Solace” But “Quantum of Claims”

Thu, 27 Nov 2008 05:31:12 GMT

In McCook v. Subramaniam, Master Ronald Dash considered whether to permit a plaintiff to add as a defendant his own auto insurer, under its underinsured motorist endorsement. The insurer resisted the motion on the basis that the plaintiff had not sued within the limitation period. Ultimately, the Master allowed the addition of the insurer, but allowed [...]

In McCook v. Subramaniam, Master Ronald Dash considered whether to permit a plaintiff to add as a defendant his own auto insurer, under its underinsured motorist endorsement. The insurer resisted the motion on the basis that the plaintiff had not sued within the limitation period.

Ultimately, the Master allowed the addition of the insurer, but allowed it to plead a limitation defence. In his reasons, the Master highlighted a significant trap for the unwary. He noted that the limitation period is twelve months from the date on which the plaintiff knew or ought to have known, not that his or her damages would exceed the actual liability limits of the tortfeasor’s policy but from the date on which he or she knew or ought to have known that the “quantum of claims” would exceed the statutory minimum limits of $200,000.

In our view though, the caselaw has not adequately explained just what is meant by the peculiar phrase, “quantum of claims”. In his reasons, Master Dash applied an earlier interpretation of the phrase by Master Graham. However, it seems to us that the meaning remains unclear.

Here, the car accident happened on June 23, 2003. The plaintiff’s car was rear-ended. He sued the negligent motorist on June 22, 2005, one day before the expiry of the two year limitation period.

Almost two years after that, on May 9, 2007, the plaintiff moved to add as a defendant his own insurer, Aviva Insurance Company of Canada, which had endorsed his auto policy with underinsured coverage.

The limitation period for an action against the underinsured insurer is a contractual one, contained in the endorsement itself. Section 17 of the endorsement provides as follows:

Every action or proceeding against the insurer for recovery under this endorsement shall be commenced within 12 months of the date that the eligible claimant or his or her representative knew or ought to have known that the quantum of claims with respect to an insured person exceeded the minimum limits for motor vehicle liability insurance in the jurisdiction in which the accident occurred, but this requirement is not a bar to an action which is commenced within 2 years of the date of the accident. [Emphasis added]

In this case, the original statement of claim sought damages of $1 million for the injured plaintiff and $200,000 for the FLA claimants. The pleading contained an allegation that the plaintiff’s injuries were “serious and permanent”. Hence, on the motion to add Aviva, counsel for the insurer argued that the plaintiff must have known at the time of issuance of the statement of claim, that “the quantum of claims” exceeded the minimum limits for motor vehicle liability insurance ($200,000 in Ontario).

As Master Dash noted, the limitation period does not speak of the quantum of damages. Rather, the endorsement uses the rather odd formulation, “quantum of claims”. What does that mean? Does the phrase refer to the numerals that follow the dollar signs in the statement of claim’s prayer for relief? If so, then the fact that the statement of claim in this case claimed damages of some $1.2 million would seem to have conclusively established that the “quantum of claims” exceeded the statutory minimum limits.

But the Master held that the amount of the claims in the statement of claim is not conclusive. He referred to an earlier decision of his colleague, Master Graham, in Sherman v. Constitution Insurance Co. of Canada. There, Master Graham said, “[t]he word “claims” can only mean what is claimed as opposed to what is recovered. Therefore, the ‘quantum of claims’ must mean the amount presented to the court when seeking the court’s assessment of damages.”

Master Graham, in Sherman, also referred to the Court of Appeal’s 1996 decision in Caruso v. Guarantee Co. of North America, where Mr. Justice Finlayson described the phrase, “quantum of claims” as “ambiguous”. (Master Dash also referred to Caruso in McCook.)

In the decision appealed from in Caruso, Justice John Jenkins had concluded that the time did not begin to run under s. 17 until the damages had been assessed at trial. As an alternative ground for rejecting the insurer’s limitation defence, Justice Jenkins had relied upon the absence of evidence presented by the insurer. The Court of Appeal noted that other cases, one from Ontario (Wimbush v. Progressive Casualty Insurance Company (1995), 17 C.C.L.I. 69 (Ont. Ct. (Gen. Div.))) and one from Alberta (Wawanesa v. Shoemaker (1994), 16 Alta. L.R. (3d) 210 (C.A.)) had also held that the time under s. 17 only begins to run once the plaintiff’s damages have been assessed at trial.

Master Graham went on, in Sherman, to indicate that “the amount presented to the court when seeking the court’s assessment of damages” was not necessarily the amount claimed in the statement of claim. So, what is it then? At what point does the plaintiff “present” an “amount” to the court “when seeking an assessment of damages”? The Sherman decision, it seems to us, leaves this question unanswered.

Master Dash applied the Sherman interpretation of “quantum of claims”, saying that “what is relevant is not what is recovered, such as after trial, but what the plaintiffs could present to the court when seeking the court’s assessment of damages”. Like Master Graham, Master Dash did not think that the prayer for relief was conclusive in establishing what the plaintiff believed to be the “quantum of claims”. He said that “the quantum of claim as pleaded in the statement of claim is a relevant factor and some evidence of the plaintiff’s view at that time as to the quantum of his claim….I believe that the better view is that the quantum pleaded is not determinative of the issue, but may provide some evidence of the plaintiffs’ knowledge or assessment of the quantum of his claim. It is a factor but only one factor and, depending on other supporting evidence, may in some cases be a significant factor. The amount inserted in the prayer for relief may bear no reasonable relationship to the plaintiffs’ real assessment of their claim, but it is to be considered in light of the available evidence.”

We think the caselaw does still allow “quantum of claims” to be interpreted as denoting an assessment after trial. But leaving that possible approach aside, Master Dash’s comments, quoted in the preceding paragraph, suggest that the relevant question is, what is the plaintiffs’ “real assessment of their claim”? Such an approach seems, in turn, to imply a subjective test. What evidence would satisfy such a test? Perhaps solicitor-client correspondence would become producible, to show what the plaintiffs actually thought their claim was worth and when they came to that conclusion.

But surely that number would be a moving target. Damages assessments change all the time throughout a lawsuit, as a result of many factors. Would it make any difference if the court were to conclude that the plaintiffs’ genuinely-held belief as to the value of their claim was not a reasonable one?

Master Dash undertook a detailed examination of the medical evidence. He concluded that that evidence did not “clearly” establish that the motion to add Aviva had not been brought within 12 months of the date on which he knew or ought to have known that the “quantum of claims” exceeded $200,000. So, Aviva was added as a defendant, with leave to plead a limitation defence.

In our opinion though, it is time for an appellate court to clarify what is meant by the words, “quantum of claims”, so that the practising bar will know just when the limitation period under s. 17 begins to run.

Judge Says Plaintiff Not Required to Pursue Claim Against Tortfeasor As Condition of Accessing Uninsured Motorist Coverage

Wed, 30 Jul 2008 13:21:52 GMT

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 [...]

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.