In a recently reported case, Kovacevic et al. v ING
Insurance Company of Canada et al., 2015 ONSC 3415, the court
has ruled that an insured may not settle an action for less than
the tortfeasor's available policy limits and then bring an
action against their own automobile insurer for underinsurance
The plaintiffs were injured in a motor vehicle accident which
occurred in Florida on February 4, 2004. The plaintiff's
vehicle was struck by a tractor/trailer vehicle. They sued the
owner of the tractor and the owner of the trailer. The owner of the
tractor failed to defend and was noted in default. The owner of the
trailer defended the Florida action. At the time of the accident,
the owner of the trailer was insured by Lincoln General Insurance
(Lincoln) with a policy limit of $1,000,000.00. In 2010, the
plaintiffs settled the Florida action for $300,000.00 at a private
mediation and signed a Full and Final Release in favour of the
defendants and Lincoln in the Florida action. The plaintiffs then
brought an action for underinsurance coverage against their own
automobile insurer, ING, who was not a party in the Florida action
and was not notified of the mediation proceedings. The plaintiffs
contended that ING was not entitled to a deduction of the Florida
tortfeasor's Lincoln insurance policy limits in the
circumstances of this case. The plaintiffs further submitted that
the limits of the policy were unavailable in the Florida action as
they believed that Lincoln was about to be insolvent at the time of
the settlement. ING brought a motion for summary judgment
dismissing the action on the basis that the plaintiff was not
entitled to settle the Florida claim for less than the available
policy limits and then pursue a claim against their own insurer for
The Court considered the following issues:
If the plaintiffs settled their claim
against the Florida tortfeasor for less than that tortfeasor's
available insurance policy limits, can they pursue a claim against
their own insurer, ING, for underinsured coverage?
In the alternative, if the answer to
the first issue is yes, is ING entitled to a deduction of the
Florida tortfeasor's full policy limits of $1,000,000.00 from
any award of damages?
Whether summary judgment should be
granted in favour of ING on the grounds that there is no genuine
issue requiring a trial with respect to the plaintiffs' claim
against ING for underinsured coverage.
ING's motion for summary judgment was granted. Justice
MacKenzie ruled that the plaintiffs were not entitled to settle
their claim against the Florida tortfeasors for less than the
available policy limits of the Florida tortfeasor's insurance
and then pursue a claim against their own insurer for
underinsurance coverage. The plaintiffs were not permitted to rely
on a bald allegation that Lincoln was potentially insolvent at the
time of the settlement when they did not conduct due diligence to
determine whether the policy limits were unavailable when they
entered into the settlement. There was no evidence that Lincoln was
not solvent at the time of the settlement and therefore, the
plaintiffs had failed to prove on a balance of probabilities that
the policy limits of the Florida tortfeasor were not available at
the time of the settlement.
The case affirms that a party must be diligent with respect to
the availability of the tortfeasor's policy limits during
settlement negotiations. Insurers will be pleased with this
decision as they should not be expected to compensate for this lack
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