Hartley et al. v. Security National Insurance Company
[Indexed as: Hartley v. Security National Insurance Co.]
Ontario Reports
Court of Appeal for Ontario
G.J. Epstein, Hourigan and Paciocco JJ.A.
September 14, 2017
137 O.R. (3d) 321 | 2017 ONCA 715
Case Summary
Insurance — Automobile insurance — Underinsured motorist endorsement
Plaintiff seriously injured in collision in Minnesota involving state-owned truck operated by state employee. Plaintiff suing in Minnesota and obtaining maximum payable under Minnesota law of US$500,000 inclusive of legal fees. Plaintiff's Canadian automobile insurer refusing to pay difference between net recovery and underinsured motorist coverage ceiling. Motion judge not erring in finding that Minnesota was "inadequately insured motorist" within meaning of OPCF 44R. Motion judge erring in finding that plaintiff could claim U.S. legal fees as special damages against his insurer.
The plaintiff was seriously injured in Minnesota when his motorcycle was struck by a State of Minnesota-owned truck operated by a state employee. He sued in Minnesota for damages. Under the Tort Claims Act, Minn. St. 3.736, there is a $500,000 cap on the amount that can be claimed by an individual and a $1,500,000 cap on the total that is payable to multiple claimants for claims arising out of a single occurrence. As a result, and despite the fact that his injuries warranted damages in excess of US$500,000, the plaintiff entered into a settlement for that amount, inclusive of legal fees. After legal costs were accounted for, he was left with approximately CAD$386,500. He looked to the defendant, his Canadian automobile insurer, for the difference between his recovery and the CAD$1,000,000 underinsured motorist coverage ceiling provided for in the OPCF 44R Family Protection Coverage endorsement. The defendant refused to pay, and the plaintiff sued. On a motion under rule 20.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the motion judge held that Minnesota was an "inadequately insured motorist" within the meaning of OPCF 44R and that the plaintiff could claim his U.S. legal fees as special damages against the defendant. The defendant appealed.
Held, the appeal should be allowed in part.
The motion judge did not err in finding that Minnesota was an "inadequately insured motorist". The fact that Minnesota chooses to self-insure is not inconsistent with it being an "inadequately insured motorist". The claim was not defeated by statutory immunity. The Tort Claims Act did not remove Minnesota's liability, but rather limited the damages that could be collected from Minnesota. The cap on damages produced a shortfall between what the plaintiff was "legally entitled to recover" in damages, and what he was entitled to receive, thereby triggering a right of indemnity under OPCF 44R. The defendant's argument that the "total of all limits" payable by Minnesota was the US$150,000,000 single occurrence cap was a contrivance, as the plaintiff, as a single individual, had no right to that amount. The phrase "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 OPCF 44R refer to the funds available to the claimant bringing the claim.
The motion judge erred in permitting the plaintiff to claim his U.S. legal fees. He correctly found that the U.S. fees were not recoverable as an insurance benefit under OPCF 44R. Sections 6 and 7 of OPCF 44R underscore that insurance coverage does not extend to the payment of fees expended in securing compensatory damages. He erred in concluding that the U.S. fees could be recovered against the defendant as special damages. To use the vehicle of special damages to provide compensation for costs incurred in securing compensatory damages undermined the contractual agreement of the parties.
Cases Referred to
Craig v. Allstate Insurance Co. of Canada (2002), 59 O.R. (3d) 590, affg; Green v. State Farm Mutual Automobile Insurance Co., [2009] O.J. No. 2713, 75 C.C.L.I. (4th) 141, consd
Other cases referred to:
Anand v. Belanger, [2010] O.J. No. 4064, 2010 ONSC 5356, 90 C.C.L.I. (4th) 138; Beausoleil v. Canadian General Insurance Co. (1992), 8 O.R. (3d) 754; Chambo v. Musseau (1993), 15 O.R. (3d) 305; Chomos v. Economical Mutual Insurance Co. (2002), 61 O.R. (3d) 28; Gostick (Litigation guardian of) v. Squance (Litigation administrator of), [2007] O.J. No. 3776, 2007 ONCA 674, 55 C.C.L.I. (4th) 14; Johnson v. Wunderlich (1986), 57 O.R. (2d) 600; Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] 2 S.C.R. 23, 2016 SCC 37; Ronning v. Citizen Sec. Mut. Ins. Co., 557 N.W. (2d) 363 (Minn. C.A. 1996); Sabean v. Portage La Prairie Mutual Insurance Co., [2017] S.C.J. No. 7, 2017 SCC 7, 406 D.L.R. (4th) 623; Somersall v. Friedman, [2002] 3 S.C.R. 109, [2002] S.C.J. No. 60, 2002 SCC 59; Walker v. Allstate Insurance Co. of Canada (1989), 67 O.R. (2d) 733.
Rules and Regulations Referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 21.01
APPEAL
From the order of G.E. Taylor J., [2016] O.J. No. 1336, 2016 ONSC 1812 (S.C.J.).
William G. Woodward, for appellant.
Richard Campbell, for respondent.¹
The judgment of the court was delivered by
PACIOCCO J.A.:
A. Overview
[1] Glen Hartley, the respondent in this appeal, and his wife, Theresa Hartley, were injured in a traffic accident while touring on a motorcycle in the State of Minnesota. Mr. Hartley's injuries were particularly serious. 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.
[2] Even though Mr. Hartley's injuries warranted damages in excess of US$500,000, he obtained a settlement of only US$500,000. This was the maximum payable by Minnesota to a tort claimant, in the circumstances. The settlement was inclusive of legal fees, including a 22 per cent contingency fee, and disbursements. After legal costs were accounted for, Mr. Hartley was left with approximately CAD$386,500.
[3] Mr. Hartley looked to his Canadian insurance company, Security National Insurance Company, to pay him the difference between the damages he received of approximately CAD$386,500, and the CAD$1 million underinsured motorist coverage ceiling provided for in an endorsement to his motor vehicle insurance policy. Specifically, he relied on the optional statutory Family Protection Coverage endorsement, OPCF 44R, pursuant to a policy issued to Mr. Hartley by Security National.
[4] Security National refused to pay. It said that Minnesota was not an "inadequately insured motorist" within the meaning of OPCF 44R, and that, even if there were coverage, the policy would not include legal expenses incurred in the Minnesota action.
[5] Mr. Hartley sued. The parties agreed to have two key issues — (1) whether Minnesota was an "inadequately insured motorist" within the meaning of OPCF 44R and (2) whether Mr. Hartley could recover his legal expenses — resolved before a motion judge under rule 21.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Mr. Hartley won on both points. The motion judge held that Minnesota was "underinsured" or, in the words of OPCF 44R, an "inadequately insured motorist". He also held that Mr. Hartley could claim the legal costs he paid ("U.S. fees") as special damages against Security National. Security National has now appealed those rulings to this court.
[6] The first issue on appeal is therefore whether the motion judge erred in concluding that Minnesota was an "inadequately insured motorist" within the meaning of OPCF 44R.
[7] The second issue on appeal is whether the motion judge erred in allowing Mr. Hartley to claim his U.S. fees as special damages in his Ontario action against Security National.
[8] I have applied a standard of correctness in considering these grounds of appeal, since both turn on the interpretation of a standard form insurance contract that is of precedential value where there is no meaningful factual matrix specific to the parties: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] 2 S.C.R. 23, 2016 SCC 37, at para. 24.
[9] Applying this standard of review, I would deny the first ground of appeal. Even though the motion judge did not engage in a close exercise in contract interpretation, I have concluded he was correct in holding that Minnesota was an "inadequately insured motorist" within the meaning of OPCF 44R.
[10] I would, however, allow the second ground of appeal: in my view, the U.S. fees cannot be claimed against Security National as special damages.
B. Did the Motion Judge Err in Concluding that Minnesota was an "Inadequately Insured Motorist"?
[11] In simple terms, OPCF 44R provides insurance against underinsurance. It is meant to put an eligible claimant in the same position they would have been in had a liable underinsured motorist carried automobile insurance in the same amount as the OPCF 44R policy. In Mr. Hartley's case, the OPCF 44R endorsement insured him to a maximum recovery of CDN$1 million.
[12] Section 3 of OPCF 44R describes what is covered:
- In consideration of a premium of $_____ or as stated on the Certificate of Automobile Insurance to which the change form is attached, the insurer shall indemnify an eligible claimant for the amount that he or she is legally entitled to recover from an inadequately insured motorist as 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.
[13] In order to prevent double recovery, other provisions of OPCF 44R reduce what the insurer must pay by any amounts that are available to the claimant from or through the inadequately insured motorist.
[14] In this case, Mr. Hartley's attempt to obtain compensation from Minnesota for the entire damages he sustained was frustrated by the Tort Claims Act, Minn. Stat. 3.736. Subdivision 9 of this statute does provide that Minnesota will pay compensation for property loss and personal injury caused by a state employee acting in the course of his or her employment. But other subdivisions cap the amount of damages that can be collected.
[15] Specifically, there is a $500,000 cap under subdivision 4(c) on the amount that can be claimed by an individual and 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".
[16] The Minnesota Torts Claims Act goes on to provide in subdivision 8 that state agencies "may procure insurance against liability . . . for damages resulting from torts", and that procurement of insurance will be a "waiver of the limits of governmental liability . . . only to the extent that valid and collectible insurance . . . exceeds those limits". Minnesota did not carry additional liability insurance that would apply to Mr. Hartley's claim.
[17] Faced with these provisions, which are not uncommon in the United States, Mr. Hartley entered into a settlement agreement with Minnesota. The agreement provides:
The parties to this Settlement Agreement agree and acknowledge that the amount paid to Plaintiff Glen Hartley and his counsel, (i.e., [US]$500,000.00) is the maximum amount Glen Hartley can recover against State Defendants pursuant to Minnesota law, including Minn. Stat. 3.736.
[18] Mr. Hartley therefore contends that the motion judge did not err in holding that Minnesota was underinsured within the meaning of OPCF 44R since Mr. Hartley was legally entitled to receive an amount under his policy above the amount available to him from Minnesota.
[19] Security National has raised three bases for refusing Mr. Hartley's claim for the shortfall left after his settlement agreement.
[20] First, it argues that Minnesota is not underinsured, but self-insured, and therefore underinsured coverage does not apply.
[21] Second, it urges that the shortfall in recovery is not the result of underinsurance, but rather the result of a statutory immunity.
[22] Finally, Security National contends that even if a self-insured state enjoying statutory immunity can be an "inadequately insured motorist", it is not accurate to say that Minnesota is underinsured. Security National urges that Minnesota offers single occurrence coverage up to US$1,500,000 that exceeds the CAD$1 million coverage ceiling payable under OPCF 44R. Security National thus maintains that its maximum liability is zero under the terms of OPCF 44R.
[23] I would reject all of these objections and hold that the motion judge was correct in concluding that Minnesota is an inadequately insured motorist.
(a) Does Minnesota's self-insurance defeat the claim?
[24] Security National's argument that there is no coverage because Minnesota is self-insured rests on the contention that self-insurance is "conceptually very different from being underinsured". This is because self-insurance lacks "the risk transfer by which traditional insurance is defined".
[25] This argument is intuitively unappealing. OPCF 44R clearly contemplates coverage if a claimant is injured by someone who has no motor vehicle insurance at all: Gostick (Litigation guardian of) v. Squance (Litigation administrator of), [2007] O.J. No. 3776, 2007 ONCA 674, 229 O.A.C. 373, at paras. 2, 14-16. One would think that a person carrying no insurance is "self-insured" since they have not transferred their risk.
[26] Approaching the matter more technically, the problem with Security National's argument is that it is misdirected. The material question is not whether "self-insurance" comfortably fits the usual concept of being insured. It is whether, as a matter of contractual interpretation, Minnesota is caught by the definition of "inadequately insured motorist" in s. 1.1.5(a) of OPCF 44R:
"inadequately insured motorist" means
(a) the identified owner or identified driver of an automobile for which the total motor vehicle liability insurance or bonds, cash deposits or other financial guarantees as required by law in lieu of insurance, obtained by the owner or driver is less than the limit of family protection coverage[.]
[27] OPCF 44R is an endorsement to a standard form insurance contract. The principles of interpretation that apply to such contracts are settled, and were recently reiterated in Sabean v. Portage La Prairie Mutual Insurance Co., [2017] S.C.J. No. 7, 2017 SCC 7, 406 D.L.R. (4th) 623.
[28] At the first step, language that is not ambiguous should be given its ordinary meaning, "as [it] would be understood by the average person applying for insurance, not as [it] might be perceived by persons versed in the niceties of insurance law": Sabean, at para. 13. If the language is ambiguous, general rules of construction can be employed to resolve the ambiguity. If these general rules fail, "courts will construe the contract contra proferentem, and interpret coverage provisions broadly and exclusion clauses narrowly": Sabean, at para. 12.
[29] As I read his reasons, the motion judge rejected Security National's "self-insurance" argument by approaching the matter as if the definition in s. 1.1.5(a) were ambiguous. In addressing the argument, he immediately went to the purpose of the coverage identified in Chomos v. Economical Mutual Insurance Co. (2002), 61 O.R. (3d) 28, at para. 20, namely, "to provide financial relief for insureds and their families from the hardships and inequities of any shortfalls in insurance compensation". He reasoned that, if accepted, Security National's argument would defeat that purpose.
[30] In fact, it was unnecessary for the motion judge to take this route, as the material language is clear. An average person applying for insurance would understand that the ordinary meaning of the phrase "financial guarantees as required by law in lieu of insurance" would include a legislated obligation by an uninsured state to indemnify its employees by paying compensation for tortious damage caused by those employees. And this is what the Minnesota Tort Claims Act expressly does. It is a legislated scheme — thereby "required by law" — subdivision 9 of which guarantees that Minnesota will indemnify its employees for damages in connection with civil claims, which would include those arising from automobile accidents.
[31] Given the definition of "inadequately insured motorist", the fact that Minnesota chooses to self-insure is not inconsistent with it being an "inadequately insured motorist".
(b) Does Minnesota's statutory immunity defeat the claim?
[32] In oral argument, Security National contended that Minnesota is not inadequately insured within the meaning of the policy endorsement because any shortfall in damage payments is the result of a statutory immunity rather than underinsurance. In my view, this is not an answer to the claim either. The Tort Claims Act does not remove Minnesota's liability but rather limits the damages that can be collected from Minnesota. Instead of assisting Security National, the cap on damages produces a shortfall between what Mr. Hartley is "legally entitled to recover" in damages, and what he is entitled to receive, thereby triggering a right of indemnity under OPCF 44R.
[33] The argument that Security National is now attempting was rejected by this court in Craig v. Allstate Insurance Co. of Canada (2002), 59 O.R. (3d) 590, leave to appeal to S.C.C. refused [2002] S.C.C.A. No. 309. There, it was settled that a tortfeasor may be an "inadequately insured motorist" where there is a shortfall in damages, even where that shortfall is the result of a statutory cap under state tort claims immunity legislation.
[34] Craig involved a Florida statute that, like Minnesota's Tort Claims Act, imposed limits on the maximum sum recoverable from State-employed tortfeasors. The maximum amount recoverable, US$100,000, was not nearly enough to cover the damages sustained by a young boy who was struck by a state bus operated by a state employee while the boy was riding his tricycle. To recover the shortfall, the Craigs sued pursuant to the underinsured motorist coverage endorsement under their Ontario motor vehicle policy. As in this case, the endorsement provided for indemnification, up to the policy limit, for the shortfall in the amount that the insured was "legally entitled to recover" from an inadequately insured motorist.
[35] The Craigs' insurance company resisted indemnifying them by invoking the partial statutory immunity that the State of Florida had legislatively created. Justice Cronk, for this court, rejected the insurance company's argument, holding that the amount the insured was "legally entitled to recover" was unaffected by the statutory limit on recovery for two reasons.
[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, affd (1989), 67 O.R. (2d) 733 (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 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, leave to appeal to S.C.C. refused (1993), 11 O.R. (3d) xiv, [1993] 1 S.C.R. x, [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] O.J. No. 401, 183 D.L.R. (4th) 396, affd [2002] 3 S.C.R. 109, [2002] S.C.J. No. 60, 2002 SCC 59 (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., C.A. 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
affords 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".
[39] The kind of limited immunity created by Minnesota's Torts Claim Act does not, therefore, prevent the legal entitlement to recover under OPCF 44R. In fact, the damage limitation imposed by Minnesota's Torts Claim Act impedes the ability to recover fully against the tortfeasor, thereby triggering the call on the "inadequately insured motorist" coverage.
[40] The fact that Minnesota's Tort Claims Act provides a partial statutory immunity, capping the amount of damages recoverable from the state, is therefore no answer to Mr. Hartley's claim.
(c) Is Minnesota underinsured relative to OPCF 44R's coverage?
[41] Facially, Mr. Hartley's maximum coverage under his policy with Security National, pursuant to the OPCF 44R endorsement, is CAD$1 million. OPCF 44R also includes a formula, however, setting out the maximum coverage payable in a particular case under the endorsement. Security National argues that, when this formula is applied, the maximum payable under OPCF 44R is nothing.
[42] The provision in question is s. 4 of OPCF 44R. In making its argument, Security National relies, in particular, on the words that I have underlined:
- The insurer's maximum liability under this change form, regardless of the number of eligible claimants or insured persons injured or killed or the number of automobiles insured under the Policy, is 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 guarantee as required by law in lieu of insurance, of the inadequately insured motorist and of any other person jointly liable with that motorist.
[43] Security National takes the position that the "total of all limits" payable by Minnesota is the US$1,500,000 single occurrence cap provided for in subdivision 4(g) of the Tort Claims Act. Security National argues that since its maximum liability under OPCF 44R of CAD$1 million does not exceed the single occurrence cap, its liability to Mr. Hartley is zero.
[44] This argument is a contrivance. In identifying the limits on what Minnesota will cover, Security National is attempting to avoid using the US$500,000 maximum available to Mr. Hartley under subdivision 4(c) of the Minnesota Tort Claims Act. Instead, Security National seeks to employ the maximum payable to multiple claimants that Mr. Hartley has no right, as an individual, to enjoy.
[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] O.J. No. 834, 26 C.C.L.I. (3d) 136, 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.
(d) Conclusion
[49] Minnesota is an "inadequately insured motorist". This is so despite the fact that it was self-insured, and despite the existence of partial statutory immunity limiting the amount of damages it must pay. The "financial guarantee as required by law in lieu of insurance" available from Minnesota is inadequate to cover the damages that Mr. Hartley is "legally entitled to recover". The motion judge was therefore correct in finding Minnesota to be an "inadequately insured motorist".
C. Did the Motion Judge Err in Permitting Mr. Hartley to Claim his U.S. Fees?
[50] Mr. Hartley incurred U.S. fees in recovering his damage settlement from Minnesota, which reduced the net amount he received to approximately CAD$387,000. Mr. Hartley sought recovery of the U.S. fees before the motion judge, invoking two alternative routes.
[51] The first route would permit Security National, when calculating the shortfall payable to Mr. Hartley under OPCF 44R, to deduct only the net amount that Mr. Hartley ultimately received from the settlement after deducting the amount he paid to his Minnesota lawyer. In support of this approach, Mr. Hartley relied on Anand v. Belanger, [2010] O.J. No. 4064, 2010 ONSC 5356, 90 C.C.L.I. (4th) 138, a broadly analogous disability insurance case where this was done.
[52] The second route would initially permit Security National to deduct the entire gross amount available through the inadequately insured motorist coverage in quantifying the shortfall, but then to permit Mr. Hartley to claim the U.S. fees as special damages in the action against Security National. This approach was implicitly suggested in Green v. State Farm Mutual Automobile Insurance Co., [2009] O.J. No. 2713, 75 C.C.L.I. (4th) 141, a case dealing with OPCF 44R.
[53] Mr. Hartley commended both approaches as different avenues to the same end. Each approach prevents double recovery, and yet ensures that the insurer does not share the benefit of the claimant's efforts in securing available recovery from the tortfeasor without also sharing the costs.
[54] The motion judge accepted the Green approach. He held that Mr. Hartley was not entitled to claim the U.S. fees from the amount payable as compensation for a shortfall in compensatory damages under the OPCF 44R. He was, however, entitled to claim them as special damages.
[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:
- In determining any amounts an eligible claimant is entitled to recover from an inadequately insured motorist, no amount shall be included with respect to costs.
[57] Together, ss. 6 and 7 of OPCF 44R underscore that insurance coverage does not extend to the payment of fees expended in securing compensatory damages:
The amount payable to an eligible claimant under the change form shall be calculated by determining the amount of damages the eligible claimant is legal entitled to recover from the inadequately insured motorist, and deducting from that amount the aggregate of the amounts referred to in Section 7 of this change form, but in no event shall the insurer be obliged to pay an amount in excess of the limit of the coverage as determined under Sections 4 and 5 of this change form.
The amount payable under this change form to an eligible claimant is excess to an amount received by the eligible claimant from any source, other than money payable on death under a policy of insurance, and is excess of the amounts that were available to an eligible claimant from
(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".
[61] I do not agree, however, with the motion judge's conclusion that the U.S. fees can be recovered against Security National as special damages. As indicated, OPCF 44R does not offer coverage to Mr. Hartley for U.S. fees, and its terms make clear that compensation will solely be for a shortfall in compensatory damages caused by an inadequately insured motorist. To use the vehicle of special damages to provide compensation for costs incurred in securing compensatory damages undermines the contractual agreement of the parties.
[62] In coming to his decision, the motion judge was attracted by the analogy of costs being awarded in actions over and above policy limits in standard Ontario automobile insurance policy litigation. That analogy, however, is inapt. There is a material difference between awarding legal costs to a party payable by another party in that same action and awarding costs incurred in a separate action as special damages payable by a party who was not even involved in the action where those costs were incurred.
[63] Since the U.S. fees are not an insurable benefit under OPCF 44R, Security National should not have to pay them. In my view, the motion judge therefore erred in holding that Mr. Hartley could claim the U.S. fees against Security National.
D. Conclusion
[64] For these reasons, I would allow the appeal, in part.
[65] I would dismiss Security National's appeal from the motion judge's order that Minnesota is "underinsured" (i.e., an "inadequately insured motorist") but would allow its appeal from the motion judge's order that Mr. Hartley may claim his U.S. fees as special damages in his action against Security National.
[66] Counsel have agreed that $5,000 in costs, all inclusive, should be payable to the successful party. Since the appeal has been allowed only in part, it will be necessary to hear further costs submissions. Written submissions of a maximum of three pages are invited. The deadline for the appellant's submissions is September 22, 2017. The deadline for the respondent's submissions is September 27, 2017.
Appeal allowed in part.
Notes
¹ Ms. Hartley was a plaintiff in the action against Security National Insurance Company that generated this appeal. She is referred to as a respondent in documents filed in this appeal, but she has nothing to respond to. Material decisions made in the action have gone against her, effectively terminating her cause of action. She has not appealed those decisions and they are not before us.
End of Document