COURT OF APPEAL FOR ONTARIO

DATE: 20000216

DOCKET: C30080

LABROSSE, WEILER and CHARRON JJ.A.

B E T W E E N :

PEARL SOMERSALL, GWENDOLYN SOMERSALL, and JANICE SOMERSALL
for the appellants

Plaintiffs

Appellants

• and -
  Brian Brock,
  for the respondent

JERRY FRIEDMAN and SCOTTISH & YORK INSURANCE CO. LIMITED

Defendants

Respondents

Heard: December 7, 1999

On appeal from the decision of Mr. Justice Harvey Spiegel reported at (1998), 1998 14920 (ON SC), 162 D.L.R. (4th) 229.

CHARRON J.A.:

[1] This appeal concerns the right of an insured person to claim

against his own insurer under the underinsured motorist coverage

of an Ontario Standard Automobile Policy when the right of the

insured to enforce a claim against the tortfeasor has been lost

or compromised.

[2] On January 29, 1989, the appellants, Pearl Somersall and

Gwendolyn Somersall, were involved in a motor vehicle accident

with the vehicle owned and operated by the respondent Jerry

Friedman. They both sustained serious bodily injury as a result

of the accident. On January 28, 1991, they issued a Statement of

Claim against Friedman. The appellant Janice Somersall joined the

action to claim damages under the Family Law Act, R.S.O. 1990,

c. F.3 on her behalf and on behalf of other family members. On

September 12, 1991, Friedman delivered a Statement of Defence.

[3] As a result of an exchange of various correspondence during

the months of October to December 1991, the following agreement

was concluded between the appellants’ solicitor and Friedman’s

solicitor:

• Friedman would admit liability for the accident at trial;

• the appellants would not make any claim against Friedman or

• his insurer in excess of Friedman’s insurance policy limits

• of $200,000.00; and

• Friedman’s insurer would (and did) make an advance payment

• of $50,000 to the appellants.

•

For the sake of convenience, this agreement will be referred to

as the “Limits Agreement.”

[4] On July 4, 1994, the appellants added their own insurer, the

respondent Scottish & York Insurance Co. Limited (“S & Y”), as a

defendant to the action. S & Y filed a Statement of Defence to

the action and cross-claimed against Friedman. Friedman amended

his Statement of Defence to plead the terms of the Limits

Agreement.

[5] Counsel for the appellants and S & Y both moved pursuant to

Rule 21.01 of the Rules of Civil Procedure, R.R.O. 1990,

Reg. 194, for the determination, before trial, of the following

question of law raised by the pleadings:

Does the agreement reached between counsel for the

plaintiffs and counsel for the defendant Friedman

limiting the plaintiffs' claim to that defendant’s

policy limits preclude the plaintiffs from advancing a

claim against Scottish & York pursuant to the

Underinsured Motorist Provisions of its policy?

[6] The appellants’ claim against S & Y is pursuant to the

underinsured coverage provisions, the S.E.F. 44 Family Protection

Endorsement, contained in an Ontario Standard Automobile Policy

issued to the appellant Pearl Somersall. Under these provisions,

S & Y is obligated to:

“indemnify each eligible claimant for the amount that

such eligible claimant is legally entitled to recover

from an inadequately insured motorist as compensatory

damages in respect of bodily injury or death sustained

by an insured person by accident arising out of the use

or operation of an automobile.” [Emphasis added.]

[7] The question for determination on the motion and on this

appeal turns on the interpretation of the words "legally entitled

to recover." These words appear repeatedly in the S.E.F. 44

endorsement, the relevant parts of which are appended to these

reasons for ease of reference.

[8] Spiegel J. held that the appellants, by reason of having

entered into the Limits Agreement, were no longer “entitled to

recover” damages from the underinsured motorist Friedman within

the meaning of the underinsured coverage provision. He therefore

answered the Rule 21.01 question in the affirmative. It was

agreed between the parties at the hearing of the motion that, if

the answer was in the affirmative, the action against S & Y

should be dismissed. Consequently, by order dated June 4, 1998,

the motions judge dismissed the appellants’ action against S & Y.

The appellants appeal against this order and S & Y is a

respondent on the appeal. Friedman did not participate in the

appeal.

[9] Although the precise question before Spiegel J. was novel,

it is my view that its answer was governed by existing

jurisprudence from this court and that the motions judge, on the

strength of those authorities, was bound to answer it in the

negative. The motions judge carefully considered these

authorities but distinguished them from the fact situation at

hand. With respect, it is my view that he erred in doing so.

[10] S & Y takes the position that the words “legally entitled to

recover” mean that the appellants must have a legally enforceable

right to recover compensatory damages from the tortfeasor in an

amount which is in excess of the tortfeasor’s insurance limits.

Since the Limits Agreement has effectively extinguished that

right, S & Y argues that the appellants’ claim under the S.E.F.

44 endorsement must fail. Alternatively, S & Y submits that, even

if the appellants are still “legally entitled to recover” from

the tortfeasor within the meaning of the insuring agreement, they

have significantly interfered with S & Y’s right of subrogation

by entering into the Limits Agreement and have therefore lost

their right to claim the benefits of the S.E.F. 44 endorsement.

[11] The appellants take the position that it has been

authoritatively determined by this court in Johnson v. Wunderlich

(1986), 1986 2618 (ON CA), 57 O.R. (2d) 600 (C.A.) and in Chambo v. Musseau (1993),

15 O.R. (2d) 305 (C.A.) that they have a direct right of action

in contract against S & Y under the S.E.F. 44 endorsement. They

submit that these authorities make it clear that this right of

action can accrue regardless of whether they commence an action

against the tortfeasor, obtain a judgment against him, or still

have an enforceable claim against him. The requirement that they

be “legally entitled to recover damages” against the tortfeasor,

as interpreted in those authorities, simply means that, in their

action against the S & Y, the appellants must establish (1) that

the tortfeasor is at fault and (2) the amount of damages caused

by such fault. Consequently, the appellants submit that, even if

they are precluded under the terms of the Limits Agreement from

claiming an amount against Friedman in excess of his policy

limits, they can still establish that he was at fault and the

amount of their damages and therefore are entitled to assert

their claim against S & Y under the S.E.F. 44 endorsement. With

respect to the subrogation issue, the appellants take the

position that the Limits Agreement does not interfere with S &

Y’s rights of subrogation. Alternatively, if the Limits Agreement

does interfere with S & Y’s rights, they submit, on the strength

of the same authorities, that this effect is not fatal to their

claim.

[12] In my view, the appellants’ position is correct. The

decision of the motions judge runs counter to the principles

established by this court in Johnson v. Wunderlich and in Chambo

v. Musseau. Spiegel J. held that the interpretation of the words

“legally entitled to recover” in those cases “should be

restricted to cases where the insured’s right to proceed against

the tortfeasor is barred by virtue of a limitation period.”1

Quite apart from the fact that this was not the fact situation in

Johnson v. Wunderlich (the insured had commenced an action

against the tortfeasor within the limitation period), I see no

principled reason to restrict the application of these

authorities to cases involving the expiry of a limitation period.

[13] In Johnson v. Wunderlich, the plaintiffs were involved in a

motor vehicle accident which occurred in June 1980. They

commenced an action against the tortfeasor in May 1982, within

the two-year limitation period contained in s.180(1) of the

Highway Traffic Act, R.S.O. 1980, c. 198. In October 1982, the

plaintiffs added their own insurer as defendant to the action in

order to claim under the uninsured motorist coverage of their

policy. By s.8(2) in the schedule to s.1 in R.R.O. 1980, Reg.535,

under the Insurance Act, R.S.O. 1980, c.218, "every action or

proceeding against the insurer for the recovery of a claim shall

be commenced within two years from the date on which the cause of

action against the insurer arose and not afterwards.” At the

commencement of the trial, the insurer brought a motion to

determine whether the plaintiffs’ action was statute-barred. The

trial judge held that the action was statute-barred because it

had not been commenced within two years of the accident. An

appeal to this court was allowed.

[14] In determining the appeal, Morden J.A., in writing for the

majority, thoroughly reviewed the relevant legislation and the

various options open to an insured person seeking to recover

under the uninsured motorist coverage provisions of an insurance

policy. In particular, he reviewed the provisions of s.4(1)(c) of

Regulation 535 (now R.R.O. Reg. 676), which provisions are also

applicable to the appellants’ claim in this case under the

underinsured motorist coverage provisions of the insurance

policy:

4(1) The determination as to whether the

person insured under the contract is legally

entitled to recover damages and, if so entitled,

the amount thereof shall be determined,

(a) by agreement between the person

insured under the contract and the insurer,

(b) at the request of the person insured

under the contract, and with the consent of

the insurer, by arbitration by some person to

be chosen by both parties, or if they cannot

agree on one person, then by two persons, one

to be chosen by the person insured under the

contract and the other by the insurer and a

third person to be appointed by the persons

so chosen; or

(c) by a court of competent jurisdiction

in Ontario in an action brought against the

insurer by the person insured under the

contract, and unless the determination has

been previously made in a contested action by

a court of competent jurisdiction in Ontario,

the insurer may include in its defence the

determination of liability and the amount

thereof.

[15] The parties before the court in Johnson v. Wunderlich,

including the Minister of Consumer and Commercial Relations as

intervener, took the position that it was open to an insured

under s.4(1)(c) to claim directly against the insurer without

first claiming against or obtaining a judgment against the

tortfeasor. Morden J.A. expressly agreed that s.4(1)(c) so

provided. He adopted this interpretation despite some

reservations which he expressed as follows at p. 608:

The reservation that I expressed about this is

primarily based on the concern that a claim confined

to the direct-action route could result in the

insurer’s subrogation rights being frustrated (see

Royal Ins. Co. of Canada v. Aguiar (1984), 48

O.R. (2d) 705, 1984 2099 (ON CA), 16 D.L.R. (4th) 477…) as well as the

insurer’s inability to confine its liability to the

balance of what is owed on a judgment obtained against

the tortfeasor (see s.5(2) of the Schedule). If,

however, my interpretation, and apparently that of

the parties, does not reflect the intention of the

drafters the necessary correction lies close to hand

in the form of an amendment to Reg. 535.

[16] Morden J.A. then defined the elements of the direct action

against the insurer (at 608-09):

Accepting, then, that a direct action for recovery is

authorized by s.4(1)(c) I think that the elements of

this cause of action are (1) a person insured (2) who

is legally entitled to recover damages from the owner

or driver of (3) an uninsured or unidentified automobile.

…The cause of action accrues when the plaintiff (the

person insured) has discovered these material facts or

ought to have discovered them by the exercise of

reasonable diligence: see Judy et al. v. Neal (1986),

1986 149 (ON CA), 57 O.R. (2d) 129 (C.A.)

…

The words “legally entitled to recover” do not

import a requirement that this issue must have

received a prior judicial determination but,

rather, simply that the person insured must

establish that the uninsured or unidentified

owner or driver is at fault and the amount of

damages: [authorities omitted.] [Emphasis added.]

[17] In the end result, the court in Johnson v. Wunderlich held

that the plaintiffs’ cause of action did not necessarily arise on

the date of the accident. It only arose when the plaintiffs

discovered, or ought to have discovered, the material facts

giving rise to the right of action, which included the fact that

the tortfeasor was uninsured. Since the facts set out in the

motion material did not reveal when the plaintiffs had discovered

all of the material facts, it could not be determined whether the

action was statute-barred. The order appealed from was set aside

and the matter remitted for trial.

[18] The recognition that an insured has a direct right of action

against his insurer which does not require a prior judicial

determination of liability against the tortfeasor is crucial in

the determination of the question on this appeal. It means that

the appellants can bring their action against S & Y without

exhausting their remedies against Friedman. The necessary

elements of the action are (1) an eligible claimant (2) who is

legally entitled to recover compensatory damages from a motorist

(3) who is inadequately insured. For the purposes of this appeal,

we can assume that the appellants are eligible claimants and that

Friedman is inadequately insured. As determined in Johnson v.

Wunderlich, in order to prove that they are legally entitled to

recover compensatory damages against Friedman, the appellants

need only establish that Friedman was at fault in the accident

and damages caused by such fault in excess of Friedman’s

insurance policy limits. If there was any doubt after Johnson v.

Wunderlich on the question whether it was necessary for the

insured to also establish that any right of action that he may

have against the tortfeasor was still subsisting, it is my view

that the issue was put to rest in Chambo v. Musseau.

[19] In Chambo v. Musseau, the plaintiff Chambo was injured in a

motor vehicle accident which she alleged was caused by the

negligence of David Musseau who was driving an uninsured car

owned by Albert Musseau. Two years and four days after the

accident, she commenced an action in negligence against the

Musseaus and against her own insurer under the uninsured motorist

coverage of her insurance policy. The insurer moved for summary

judgment under Rule 20 of the Rules of Civil Procedure on the

ground that the plaintiff’s failure to commence her action within

two years of the accident as prescribed under the Highway Traffic

Act was fatal to her action against the owner and the driver and,

consequently, also fatal to her claim against the insurer since

she could not establish that she was “legally entitled to recover

damages” against the uninsured owner and driver. The motions

judge accepted this argument and dismissed the plaintiff’s

action. On appeal, this court rejected the insurer’s argument and

held that the motions judge erred in dismissing the action

against the insurer.

[20] Osborne J.A., in writing for the court, referred extensively

to the judgment in Johnson v. Wunderlich and reiterated that an

insured person can make a claim directly against the insurer.

The court noted that the claim against the insurer is different

from that against the tortfeasor. It is based in contract and is

subject to its own limitation period. As in Johnson v.

Wunderlich, the judgment of the motions judge was set aside and

the matter was remitted for trial because the motion material did

not establish when the plaintiff discovered that the Musseau

vehicle was uninsured. Hence, it could not be determined on this

motion for summary judgment whether the action was statute-

barred.

[21] The court in Chambo v. Musseau reiterated that “the words

‘legally entitled to recover damages’ require the insured person

to establish only that the uninsured tortfeasor is at fault and

the quantum of the insured person's damages.” The court held

further, at p. 314, that:

[i]n relation to her direct action against the [insurer],

the appellant does not have to establish that her action

against the tortfeasors was commenced within the time

prescribed in s.180(1) of the Highway Traffic Act. That

is a non-issue in the direct action against the [insurer],

whether or not the uninsured tortfeasors were also named

as defendants in the action.

[22] Quite clearly, if this court in Chambo v. Musseau had been

of the view that it was necessary for the plaintiff to establish

that her right of action against the Musseaus was still

enforceable in order to succeed against the insurer, as the

insurer contends in this case, it would have reached the opposite

result. Based on the reasoning advanced by S & Y in this case,

the insurer in Chambo v. Musseau would have been entitled to a

dismissal of the action because the plaintiff’s claim against the

tortfeasors was prescribed by statute and no longer enforceable.

[23] I see no principled reason to distinguish this case from the

fact situation in Chambo v. Musseau. The fact that the appellants

have compromised their right of action against the tortfeasor by

entering into an agreement, as opposed to having missed a

limitation period, can be of no moment. Surely missing a

limitation period is the worst compromise of the action that can

be made. Even if the Limits Agreement was found to have

interfered with the insurer’s rights of subrogation, a question

which does not have to be determined on this appeal, it would not

advance the insurer’s position since the missing of a limitation

period by a plaintiff against a tortfeasor also defeats an

insurer’s subrogated claim: see Royal Insurance Co. of Canada v.

Aguiar (1984), 1984 2099 (ON CA), 48 O.R. (2d) 705 (C.A.).

[24] The appellants’ position is also supported by another

decision of this court in Beausoleil v. Canadian General

Insurance Co. (1992), 1992 8679 (ON CA), 8 O.R. (3d) 754 (C.A.). The plaintiff

Beausoleil was injured in a motor vehicle accident in

Massachusetts and suffered substantial damages. He commenced an

action against the tortfeasors in Massachusetts but the maximum

that he could expect to recover from the insurers of the

defendants in Massachusetts was $50,000. Beausoleil therefore

commenced an action against his own insurer under the

underinsured motorist coverage of his policy. A motion was

brought to determine whether the action against the insurer was

premature because Beausoleil had not first obtained a judgment

against the tortfeasors and exhausted his remedies against them.

The motions judge held that the action was premature and issued

judgment accordingly. The decision was reversed on appeal to this

court.

[25] This court in Beausoleil considered the provisions of the

applicable S.E.F. 42 endorsement, noting that the endorsement had

been replaced by S.E.F. 44 but that there was no essential

distinction in the terms, and concluded, at p. 758, that the

words “legally entitled to recover” did “not require a judgment

and most certainly [did] not require that the insured exhaust his

remedies under that judgment.” The court referred extensively to

the decision in Johnson v. Wunderlich and rejected the argument

that the case should be distinguished on the basis that it dealt

with the uninsured motorist coverage as opposed to the

underinsured motorist coverage. Grange J.A., in writing for the

court, noted Morden J.A.’s reservations as expressed in Johnson

v. Wunderlich on the issue of subrogation and stated as follows

(at p.760):

In any event, the concern over the insurer’s

subrogation rights cannot affect the rights of the

insured to recover under this policy. As Morden

J.A. put it “the necessary correction lies close

to hand in the form of an amendment to” S.E.F. 42.

I might just add here that the new

S.E.F. No. 44 does contain a specific clause

subrogating the insurer to the rights of the

insured. I am not sure why this was necessary

in light of the general subrogation rights

given by s.278 of the Insurance Act, R.S.O.

1990, c.I.8.

[26] I note further that s.278(6) of the Insurance Act, R.S.O.

1990, c. I.8 provides that “[a] settlement or release given

before or after an action is brought does not bar the rights of

the insured or the insurer, as the case may be, unless they have

concurred therein.” In any event, it is not necessary to decide

whether S & Y’s rights of subrogation have in any way been

compromised in this case. Further, it would not be appropriate

to decide this issue since Friedman did not participate in the

appeal.

[27] There is one further argument made by S & Y that I wish to

comment upon. S & Y submits that, if the appellants’ position is

correct, it could mean that even if a plaintiff’s claim against a

tortfeasor is barred for any reason, including the operation of

the various “no-fault” regimes in effect in Ontario since June of

1990, the plaintiff’s claim against an insurer under the

uninsured or the underinsured motorist coverage could still be

maintained, so long as the plaintiff could establish fault on the

part of the tortfeasor and damages. Hence, it is argued, a

decision of this court in favour of the appellants would serve to

defeat the statutory regime presently in place in Ontario in all

cases where there is an uninsured or underinsured motorist

involved. S & Y advanced the same argument in first instance, and

the appellants conceded before Spiegel J. (a position they no

longer maintain) that this result would be a logical extension of

the position they were advancing. The motions judge found the

argument compelling. He stated as follows:

This would result in a situation that a person injured by

the negligence of an uninsured or inadequately insured

tortfeasor would be in a better position than if the

tortfeasor was fully insured. I am not prepared to

interpret the words in question in a manner which would

create such an anomalous result.

[28] Consequently, the motions judge held that the interpretation

of the words “legally entitled to recover” adopted in Johnson v.

Wunderlich and reiterated in Chambo v. Musseau should be

restricted to cases where the insured’s right to proceed against

the tortfeasor is barred by virtue of a limitation period.

[29] I do not accept the argument advanced by S & Y. It ignores

the fact that, as discussed earlier, one of the elements that

must be established by the insured in a claim against the insurer

is that the uninsured or underinsured person is “at fault”. The

determination of “fault” must be made in the context of all

applicable laws. In my view, an insured could not successfully

argue that an uninsured or underinsured motorist is “at fault” if

the injuries caused by such alleged “fault” were sustained in a

motor vehicle accident occurring in a jurisdiction governed by a

“no-fault” regime, unless the insured can meet the requirements

under the particular regime. Indeed, one of the cases relied upon

by S & Y is consistent with this approach. See MacKenzie v.

Zurich Insurance Co. (1990), 1990 6837 (ON SC), 65 D.L.R. (4th) 765 (Ont. High Ct.)

where the court held that no claim lies in Ontario on an

underinsured motorist endorsement unless the person responsible

for the accident is “legally liable.” Since the accident occurred

in the Province of Quebec and Quebec law provided for a no fault

compensation scheme, the underinsured motorist was not liable and

the endorsement did not apply.

[30] Finally, I wish to make a few comments on those cases relied

upon by S. & Y that may appear to be in conflict with the

position advanced by the appellants.

[31] S & Y relies on two cases from Alberta, Fogarty v. Co-

operators Group Limited, [1990] ILR 1-2545 (Alta Q.B.) and

Nielson v. Co-operators General Insurance, [1997] A.J. No. 1108

(Alta. C.A.). In Fogarty, the plaintiff commenced an action

against the Estate of the deceased tortfeasor after the expiry of

a limitation period. She later agreed to discontinue her action

against the Estate and also consented to a judgment distributing

certain insurance proceeds amongst various claimants of the

Estate. The judgment expressly dismissed the plaintiff’s claim

and set out that her action had been commenced outside the

limitation period. The plaintiff then commenced an action against

her own insurer under the underinsured motorist endorsement of

her policy, the S.E.F. 42. The endorsement provided that the

determination of legal liability and amount of damages could be

made by agreement or by arbitration in language equivalent to

s.4(1)(a) and (b) of the Ontario Regulation 535, set out earlier

in this judgment. The court held, at p. 9908, that the plaintiff

could no longer maintain her action against the insurer for the

following reason:

I am respectfully of the view that once there has been a

final judicial decision dealing with the matter of

liability of the tort-feasor owner-operator vis-€-vis

the insured, it is no longer reasonably possible to

refer that judicially determined matter for agreement

or arbitration under s.4 of S.E.F. No. 42. In the case

at bar, the insured, having consented to a judgment-

which judgment was entered – dismissing the liability

claim of the insured against the tort-feasor owner and

driver, the insured has thereby foreclosed its opportunity

to prove by arbitration or otherwise that plaintiff is

“legally entitled to recover from the owner or operator”

under S.E.F. NO. 42.

[32] It is important to note that the Alberta S.E.F. No. 42 in

question did not provide that liability and the amount of damages

could also be determined “by a Court of competent jurisdiction in

Ontario in an action brought against the insurer by the person

insured under the contract…” as provided in s.4(1)(c) of the

Ontario regulation. It will be recalled that it is on the basis

of this court’s interpretation of s.4(1)(c) in Johnson v.

Wunderlich and in cases that follow that the principles relating

to the “direct action” were established. As evidenced by the case

in Fogarty, the Alberta provision does not contain the equivalent

to our s.4(1)(c). It follows that both the Fogarty and the

Nielson cases can be of limited assistance. I note further that

the Nielson decision is a nine-line memorandum of judgment

delivered orally by the Alberta Court of Appeal that provides no

analysis.

[33] For these reasons, I would allow the appeal, set aside

paragraph 1 of the order of Spiegel J. dated June 4, 1998, and

instead, declare that the question of law raised by the pleadings

be answered as follows:

Does the agreement reached between counsel for the

plaintiffs and counsel for the defendant Friedman

limiting the plaintiffs' claim to that defendant’s

policy limits preclude the plaintiffs from advancing a

claim against Scottish & York pursuant to the

Underinsured Motorist Provisions of its policy?

No.

[34] I would also allow the appellants their costs of the motion

and of the appeal.

(signed) "Louise Charron J.A."

(signed) "I agree J. M. Labrosse J.A."

(signed) "I agree K. M. Weiler J.A."

RELEASED: February 16, 2000

C30080

APPENDIX "A" TO JUDGMENT IN

PEARL SOMERSALL et al. v. JERRY FRIEDMAN et al.

Extracts of S.E.F. 44 Family Protection Endorsement

2. INSURING AGREEMENT

In consideration of the premium charged and subject to the

provisions hereof, it is understood and agreed that the

Insurer shall indemnify each eligible claimant for the

amount that such eligible claimant is legally entitled to

recover from an inadequately insured motorist as

compensatory damages in respect of bodily injury or death

sustained by an insured person by accident arising out of

the use or operation of an automobile.

3. LIMIT OF COVERAGE UNDER THIS ENDORSEMENT

(a) The Insurer's maximum liability under this endorsement,

regardless of the number of eligible claimants, or

number of insured persons injured or killed, or number

of automobiles insured under the policy shall be the

amount by which the Limit of Family Protection Coverage

exceeds the total of all limits of motor vehicle

liability insurance, or bonds, or cash deposits, or

other financial guarantees as required by law in lieu

of such insurance, of the inadequately insured motorist

and of any person jointly liable therewith.

(b) Where this endorsement applies as excess, the Insurer's

maximum liability under this endorsement is that amount

determined in accordance with paragraph 3(a) less the

amounts available to eligible claimants under any first

loss insurance as referred to in paragraph 7 of this

endorsement.

4. AMOUNT PAYABLE PER ELIGIBLE CLAIMANT

(a) The amount payable under this endorsement to any

eligible claimant shall be ascertained by determining

the amount of damages the eligible claimant is legally

entitled to recover from the inadequately insured

motorist and deducting from that amount the aggregate

of the amounts referred to in paragraph 4(b), but in no

event shall the Insurer be obliged to pay any amount in

excess of the limit of coverage as determined under

paragraph 3 of this endorsement.

(b) The amount payable under this endorsement to any eligible

claimant is excess to any amount actually recovered by the

eligible claimant from any source (other than money payable

on death under a policy of insurance) and is excess to any

amounts the eligible claimant is entitled to recover (whether

such entitlement is pursued or not) from:

(i) the insurers of the inadequately insured motorist,

and from bonds, cash deposits or other financial

guarantees given on behalf of the inadequately

insured motorist;

(ii) the insurers of any person jointly liable with the

inadequately insured motorist for the damages

sustained by an insured person;

(iii) the R‰gie de l'assurance automobile du Qu‰bec;

(iv) an unsatisfied judgment fund or similar plan or

which would have been payable by such fund or plan

had this endorsement not been in effect;

(v) the uninsured motorist coverage of a motor

vehicle liability policy;

(vi) any automobile accident benefits plan applicable

in the jurisdiction in which the accident occurred;

(vii) any policy of insurance providing disability

benefits or loss of income benefits or medical

expense or rehabilitation benefits;

(viii) any Worker's Compensation Act or similar law

of the jurisdiction applicable to the injury or

death sustained;

(ix) any Family Protection Coverage of a motor

vehicle liability policy.

. . .

5. DETERMINATION OF THE AMOUNT AN ELIGIBLE

CLAIMANT IS LEGALLY ENTITLED TO RECOVER

(a) The amount that an eligible claimant is legally

entitled to recover shall be determined in accordance

with the procedures set forth for determination of the

issues of quantum and liability by the uninsured

motorist coverage provisions of the policy.

(b) In determining the amount an eligible claimant is

legally entitled to recover from the inadequately

insured motorist, issues of quantum shall be decided in

accordance with the law of the province governing the

policy and issues of liability shall be decided in

accordance with the law of the place where the accident

occurred.

(c) In determining any amounts an eligible claimant is

legally entitled to recover, no amount shall be

included with respect to pre-judgment interest

accumulating prior to notice as required by this

endorsement.

. . .

6. PROCEDURES

(a) The following requirements are conditions precedent to

the liability of the Insurer to the eligible claimant

under this endorsement:

(i) the eligible claimant shall promptly give written

notice, with all available particulars, of any

accident involving injury or death to an insured

person and of any claim made on account of the

accident,

(ii) the eligible claimant shall, if so required,

provide details of any policies of insurance,

other than life insurance, to which the eligible

claimant may have recourse,

(iii) the eligible claimant and the insured person

shall submit to examination under oath, and shall

produce for examination at such reasonable place

and time as is designated by the Insurer or its

representative, all documents in their possession

or control that relate to the matters in question,

and they shall permit extracts and copies thereof

to be made.

(b) Where an eligible claimant commences a legal action for

damages for bodily injury or death against any other

person owning or operating an automobile involved in

the accident, a copy of the Writ of Summons or other

initiating process shall be delivered or sent by

registered mail immediately to the chief agency or head

office of the Insurer in the province together with

particulars of the insurance and loss.

(c) Every action or proceeding against the Insurer for

recovery under this endorsement shall be commenced

within 12 months from the date upon which the eligible

claimant or his legal representatives knew or ought to

have known that the quantum of the claims with respect

to an insured person exceeded the minimum limits for

motor vehicle liability insurance in the jurisdiction

in which the accident occurred. No action which is

commenced within 2 years of the date of the accident

shall be barred by this provision.

. . .

9. SUBROGATION

Where a claim is made under this endorsement, the Insurer is

subrogated to the rights of the eligible claimant by whom a

claim is made, and may maintain an action in the name of

that person against the inadequately insured motorist and

the persons referred to in paragraph 4(b).

10. ASSIGNMENT OF RIGHTS OF ACTION

Where a payment is made under this endorsement, the Insurer

is entitled to receive from the eligible claimant, in

consideration thereof, an assignment of all rights of action

whether judgment is obtained or not, and the eligible

claimant undertakes to cooperate with the Insurer, except in

a pecuniary way, in the pursuit of any subrogated action or

any right of action so assigned.

1 Although S & Y plead in its Statement of Defence that the

plaintiffs’ claims are barred by the limitation period prescribed

under s.6(c) of the S.E.F. 44 endorsement, the issue is not

raised on this Rule 21 motion.