I. INSURANCE ISSUES
A. An Ontario plaintiff was held to be able to look to his OPCF 44R insurer to pay his damages in excess of a liability cap in the U.S. state where the accident occurred up to the OPCF 44R limits but not for the plaintiff's U.S. legal fees.
Hartley v Security National Insurance Company, 2017 ONCA 715, per Paciocco J.A. [4255]
I. FACTS AND ISSUES
Glen Hartley, and his wife, Theresa, were injured
in a traffic accident while touring the state of Minnesota on their
motorcycle. The accident occurred when the Hartleys' motorcycle
was struck by a state of Minnesota-owned truck, operated by a state
employee. The Hartleys retained Minnesota counsel and sued the
State of Minnesota for damages. Under the Minnesota Tort Claims Act, Mr. Hartley could only receive a maximum of $500,000 (USD) despite his injuries warranting in excess of that. The settlement was also inclusive of legal fees (including a 22% contingency fee) and disbursements resulting in Mr. Hartley being left with only $386,500 CAD. There was also a $1,500,000 cap under subdivision 4(g) on the total that is payable "for any number of claims arising out of a single occurrence". Mr. Hartley approached his Canadian insurance company, Security National Insurance Company, to pay the difference, through his underinsured motorist coverage ceiling which provided for an endorsement to his motor vehicle insurance policy. He specifically relied upon the optional statutory "Family Protection Coverage Endorsement OPCF 44R" ("OPCF 44R"), pursuant to a policy issued to Mr. Hartley by Security National. OPCF 44R provides insurance against underinsurance. The Canadian insurer refused to pay, stating that Minnesota was not an "inadequately insured motorist" within the meaning of OPCF 44R, and that, even if there was coverage, the policy would not include legal expenses incurred in the Minnesota action. There were two key issues:
Security National appealed that ruling, raising three arguments for refusing Mr. Hartley's claim:
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II. HELD: Appeal relating to
legal fees allowed.
The Court rejected all three of Security National's arguments.
36 First, she held that the
term "legally entitled to recover" describes the amount
of damages that an at-fault underinsured motorist is proved to have
caused, rather than the amount a tortfeasor can legally be required
to pay. Accordingly, the legal entitlement to recover that triggers
the obligation to indemnify is not compromised by limits on the
ability to recover, whether those limits arise from statutory bars
to action or statutory or contractual immunity provisions:
Craig, at para. 20, relying upon
Walker v. Allstate Insurance Co. of
Canada (1986), 56 O.R. (2d) 11 (H.C.J.), affirmed
(1989), 67 O.R. (2d) 733 (C.A.) (liability of tortfeaser's
insurance company excluded because of policy breach -- recovery by
claimant of damages under his own policy's uninsured motorist
coverage); Johnson v. Wunderlich (1986),
57 O.R. (2d) 600 (C.A.) and Chambo v.
Musseau (1993), 15 O.R. (3d) 305 (limitation period
defences available to tortfeasor -- recovery by claimant of damages
under his own policy's underinsured motorist coverage);
Beausoleil v. Canadian General Insurance
Co. (1992), 8 O.R. (3d) 754 (C.A.), leave to appeal
refused, [1992] S.C.C.A. No. 367 (statutory limit on state
liability in Massachusetts -- recovery by claimant of damages under
his own policy's underinsured motorist coverage);
Somersall v. Friedman (2000), 183 D.L.R.
(4th) 396 (C.A.), affirmed, 2002 SCC 59, [2002] 3 S.C.R. 109
(settlement agreement compromising claim against tortfeasor
voluntarily entered into -- recovery by claimant of shortfall under
his own policy's underinsured motorist coverage).
37 Second, Cronk J.A. held that, properly characterized, the Florida statute did not make Florida immune from liability, nor did it bar a right of action, or prevent Florida from being sued and from having damages claimed and proved against it. What the statute did was limit the amount of compensable damages that Florida would be required to pay.
38 Not surprisingly, given its
terms, this is how the Minnesota scheme has been interpreted in
Minnesota. For example, in Ronning v. Citizen Sec. Mut.
Ins. Co., 557 N.W (2d) 363 (Minn CA 1996), the Court
of Appeal for Minnesota rejected the argument that a claimant was
only "legally entitled to recover" an amount up to the
statutory ceiling. The court held, at p. 366, that the
statute:
[A]ffords limited immunity, as it
does not prohibit a party from bringing an action and obtaining
judgment against a tortfeasor as does absolute immunity. Thus, the
immunity defence under [the statute is] not absolute within the
meaning of the term "legally entitled to recover".
45 A similar argument was
attempted in Craig and was flatly
rejected. In that case, the school board that employed the
tortfeasor had an excess insurance policy with a US$700,000 limit.
The policy was not available to the benefit of the injured
plaintiffs, the Craigs. The Craigs' insurance company
nonetheless argued that the excess insurance policy would produce a
coverage ratio that would reduce the company's maximum
liability to zero under an endorsement provision identical to s. 4
of OPCF 44R. With good reason, the motion judge took issue with the
insurance company's attempt to avoid liability by relying on
coverage not available to the Craigs. He commented that "[t]he
logic of this defeats the purpose of the ... coverage, that is, to
protect insureds from tortfeasors who have insurance which is
inadequate to cover the plaintiff's damages" (emphasis in
original): Craig v. Allstate Insurance Co. of
Canada (2001), 26 C.C.L.I. (3d) 136 (Ont. S.C.J.), at
para. 40.
46 Justice Cronk agreed with the motion judge's conclusion. On her reading of the endorsement at issue in Craig, the ordinary language of the provision was enough to defeat the insurance company's attempt to avoid liability. 47 The same holds true here. 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. 48 Refuge from liability for the shortfall in coverage under Minnesota's Tort Claims Act cannot therefore be found in the insurer's maximum liability.
55 I agree with the motion
judge that the U.S. fees are not recoverable as an insurance
benefit under OPCF 44R. On the clear terms of s. 3 of the
endorsement, what is being provided by the insurer is
indemnification 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). While the U.S. fees were clearly
incurred in securing "compensatory damages", they are not
themselves compensatory damages.
56 Moreover, the words of OPCF 44R setting out the quantification of the amount payable by Security National are clear in preventing recovery of the U.S. fees as a policy benefit. Section 13 provides:
57 Together, sections 6 and 7
of OPCF 44R underscore that insurance coverage does not extend to
the payment of fees expended in securing compensatory
damages:
(a) the insurers of the
inadequately insured motorist, and from bonds, cash, deposits or
other financial guarantees given on behalf of the inadequately
insured motorist;
58 As can be seen, s. 6 allows
the amounts referred to in s. 7 to be deducted from the amount
payable to the claimant. I agree with para. 21 of
Green: the language of s. 7 is
unambiguous in directing that the insurer is "entitled to
deduct all funds obtained ... as compensation. No allowance is made
for any costs incurred in pursing recovery".
59 Indeed, s. 7 requires the deduction not only of amounts received by claimants, but also the "amounts that were available to the eligible claimant". In other words, what must be deducted is the higher of two amounts: the amount received, and the amount available. Even if it is accepted that Mr. Hartley only received US$500,000 minus the U.S. fees, he was entitled under Minnesota law to receive US$500,000 from Minnesota. 60 Simply put, the U.S fees are not covered benefits. The motion judge was therefore correct in finding that those fees cannot be claimed against Security National as "compensatory damages".
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