Kovacevic et al. v. ING Insurance Company of Canada et al.

[Indexed as: Kovacevic v. ING Insurance Co. of Canada]

Ontario Reports

Ontario Superior Court of Justice,

MacKenzie J.

May 27, 2015

126 O.R. (3d) 471 | 2015 ONSC 3415

Case Summary

Insurance — Automobile insurance — Underinsured motorist endorsement — Insured bringing action in Florida for damages arising out of motor vehicle accident — Insured settling action for less than tortfeasor's available policy limits and then bringing action against their own automobile insurer for underinsurance coverage — Insurer's motion for summary judgment dismissing action granted — Insured not permitted to rely on bald allegation that Florida tortfeasor's insurer was potentially insolvent — Insured not conducting due diligence to determine whether or not policy limits were unavailable when they entered into settlement agreement — Insured failing to prove that tortfeasor's policy limits were not available at time of settlement.

The insured were injured in a motor vehicle accident in Florida. They sued the two tortfeasors in Florida. One of the tortfeasors did not defend. The defending tortfeasor was insured by Lincoln, with a policy limit of US$1,000,000. The insured settled the action at a private mediation for $300,000. They then brought an action for underinsurance coverage against their own automobile insurer, who was not a party in the Florida action and was not notified of the mediation proceedings. The insurer brought a motion for summary judgment dismissing the action.

Held, the motion should be granted.

The insured 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. They 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. The insured 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.

Sadhu v. Driver, [2009] O.J. No. 1655, 73 C.C.L.I. (4th) 100, 176 A.C.W.S. (3d) 1154, 2009 18669 (S.C.J.), apld

Somersall v. Friedman, [2002] 3 S.C.R. 109, [2002] S.C.J. No. 60, 2002 SCC 59, 215 D.L.R. (4th) 577, 292 N.R. 1, J.E. 2002-1464, 163 O.A.C. 201, [2002] R.R.A. 679, 39 C.C.L.I. (3d) 1, [2002] I.L.R. I-4114, 25 M.V.R. (4th) 1, 115 A.C.W.S. (3d) 695, consd [page472]

Other cases referred to

Hryniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7, 314 O.A.C. 1, 453 N.R. 5, 2014EXP-319, J.E. 2014-162, EYB 2014-231951, 95 E.T.R. (3d) 1, 12 C.C.E.L. (4th) 1, 27 C.L.R. (4th) 1, 21 B.L.R. (5th) 248, 46 C.P.C. (7th) 217, 37 R.P.R. (5th) 1, 366 D.L.R. (4th) 641, 2014EXP-319, J.E. 2014-162; Petrasso v. State Farm Insurance Co., [2010] O.J. No. 2281, 2010 ONSC 3085, [2010] I.L.R. I-4991, 87 C.C.L.I. (4th) 141, 189 A.C.W.S. (3d) 218 (S.C.J.)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20, 20.04(2), (a), (2.1)

MOTION for summary judgment dismissing an action.

Ava Hillier, for plaintiff (responding party).

Jamie R. Pollack and Jonathan Heeney, for defendant (moving party).

Endorsement of MACKENZIE J.: —

Nature of the Proceeding

[1] The defendant moves under Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for summary judgment to dismiss the plaintiff's claim for damages. The plaintiff seeks damages against the defendant pursuant to the uninsured/ underinsured terms of the plaintiffs' motor vehicle liability policy with the defendant. In the alternative, the defendant seeks a declaration that it is entitled to a deduction of the policy limits of US$1 million arising out of the insured tortfeasor's insurance policy against any damage award that may be made in favour of the plaintiffs in the event that the matter proceeds to trial.

Background

[2] The plaintiffs, on or about February 4, 2004, were involved in a motor vehicle accident in the State of Florida, U.S.A. (the "MVA"). The plaintiffs' vehicle was struck by a tractor/trailer vehicle. The tractor was owned by C.A. and the trailer was owned by N.D. As a result of the accident the plaintiff Linda Kovacevic suffered serious and permanent personal injuries, and the plaintiff Radovan Kovacevic suffered an injury to his left wrist and dental injuries. The plaintiffs at the time were insured under a standard Ontario motor vehicle liability policy issued by the defendant. This policy of insurance had a policy limit of $2 million and contained the OCPF 44R -- Family Protection Endorsement. [page473]

[3] Following the MVA, the plaintiffs retained legal counsel in the State of Florida to pursue an action for personal injuries.

[4] C.A., the owner of the tractor, failed to defend the Florida action and was noted in default. N.D., the owner of the trailer, defended the Florida action and was represented by American counsel. At the time of the MVA, N.D. was insured under a motor vehicle liability policy issued by Lincoln General Insurance Company ("L.G.I.C.") having a policy limit of US$1 million (the "L.G.I.C. policy").

[5] In September 2007, N.D. provided a written response to interrogatories in the Florida action. In that response, N.D. confirmed it was insured by L.G.I.C. with a policy limit of US$1 million. The response by N.D. did not identify any coverage issues or raise any issues concerning the availability of the policy limits. This response was never altered or supplemented by N.D. through its counsel.

[6] On or about April 21, 2010, the plaintiffs settled the Florida action against N.D. and L.G.I.C. for US$300,000 at a private mediation (the "Settlement"). The Settlement was for $300,000 (gross), before deduction of legal expenses.

[7] On or about May 3, 2010, the plaintiffs signed a Full and Final Release in favour of the defendants and L.G.I.C. in the Florida action.

[8] The Full and Final Release contained among other things the following terms:

It is understood that the acceptance of the aforesaid sums and the execution and delivery of this Release is not to be considered as any admission of liability on the part of the said Releasee but is in Settlement and compromise of doubtful and disputed claims which have been or may be made against the Releasees and for which the Releasees have denied and still deny liability.

Further, the Settlement herein is a recognition of the cost, expense and inconvenience of protracted litigation and is in no way intended to be construed as an admission of wrongdoing by or on behalf of any of the Releasees.

Finally, in addition to the foregoing reasons, the undersigned have entered into a Settlement agreement for less than the available policy amounts, and the full value of the claim, due to the undersigned's concerns over the potential insolvency of Lincoln General Insurance Company.

(Emphasis added)

[9] The Full and Final Release ends with the following sentence in upper case letters above the date and signature line of the plaintiff Lynda Kovacevic:

THE UNDERSIGNED FURTHER STATE THAT THEY HAVE CAREFULLY READ THE FOREGOING INDEMNIFYING RELEASE AND KNOW THE CONTENTS THEREOF AND [page474] SIGN SAME AS THEIR OWN FREE WILL, AND HAVE NOT RELIED ON ANY REPRESENTATIONS MADE BY ANY OF THE PARTIES RELEASED HEREIN, THEIR ATTORNEYS, OR REPRESENTATIVES IN ARRIVING AT THIS DECISION.

(Emphasis added)

[10] In addition to the full signature of Lynda Kovacevic, there are initials by both plaintiffs underneath the signature line for Lynda Kovacevic.

[11] As noted, L.G.I.C. paid out $300,000 in full satisfaction of the plaintiff's claim in the Florida action. The defendant was not notified of the mediation proceedings in the Florida action and did not consent to the terms of the Settlement; it was also not a party in the Florida action.

[12] It has since been determined and it is not in dispute that L.G.I.C. was not insolvent at the date of the Settlement nor has it become insolvent at any time since the Settlement.

[13] It is also not in dispute that in February 2009, L.G.I.C. elected to go into a "voluntary solvent run-off". This process entailed L.G.I.C. ceasing to write new insurance policies but it continued to satisfy and pay out its existing obligations and liabilities under previously issued polices then current.

[14] In the event, the plaintiffs commenced this action seeking to pursue a claim for damages arising out of the Florida action against the defendant pursuant to the uninsured/ underinsured provisions of their policy with the defendant. In this regard, the plaintiffs contend the defendant is not entitled to a deduction of the Florida tortfeasor's L.G.I.C. insurance policy limits (US$1,000,000) in the circumstances of this case.

The Issue

[15] The question on this motion is whether the plaintiffs (the responding parties) are entitled to pursue a claim against the defendant (the moving party) for underinsured coverage after they settled with the Florida tortfeasors and their insurer L.G.I.C. for less than the available policy limits of US$1 million.

[16] The resolution of this question engages the court's consideration of the following matters:

(1) If the responding parties 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 (the moving party) for underinsured coverage?

(2) In the alternative, if the answer to the above consideration is affirmative, is the moving party entitled to a deduction of the Florida tortfeasor's full policy limits of US$1 million from any award of damages at trial? [page475]

(3) Whether summary judgment should be granted in favour of the moving party on the grounds there is no genuine issue requiring a trial with respect to the plaintiff's claim against the moving party for underinsured coverage.

The Positions of the Parties

The position of the moving party

[17] Counsel for the moving party submits the responding parties are 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 the moving party as their own insurer for underinsurance coverage. In this regard, the moving party contends that the responding parties have not proven on the balance of probabilities that the accident was caused by an inadequately insured motorist and points out that the responding parties settled with the Florida defendant for an amount significantly under the Florida defendants' policy limits.

[18] Counsel further contends that the responding parties have failed to prove on the balance of probabilities that the policy limits of the Florida defendants were not available at the time of the Settlement, pointing out that there is no evidence that the Florida defendant's insurer, L.G.I.C., was not solvent at the time of the Settlement or had sufficient policy limits in order to cover the responding parties' claim.

[19] The moving party refers to the pertinent terms of the endorsement OPCF 44R in the following terms. Counsel notes in particular s. 7 of the OPCF 44R (in part) as follows:

7. The amount payable under this change form [OPCF 44R] 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 to amounts that were available to the eligible claimant from:

(a) the insurers of the inadequately insured motorist . . .

[20] Counsel submits that the underinsured coverage is meant to provide financial relief from shortfalls in insurance compensation, and by way of example, states that if an insured person is injured by a person with third party liability limits lower than their own limits, the insured person can recover the excess amount from his or her insurer.

[21] Counsel contends for there to be a shortfall in insurance compensation the insured must be legally entitled to recover damages that exceed the amount of the policy limits of the at-fault party regardless of the amount received by the insured. [page476] In support, counsel refers to a decision of this court in Sadhu v. Driver, [2009] O.J. No. 1655, 2009 18669 (S.C.J.).

[22] In Sadhu the plaintiff settled for less than the policy limits of the at-fault driver without entering into a limits agreement and then brought a claim against her own insurer for underinsurance coverage. The court (Arrell J.) stated that the plaintiff was not entitled to pursue a claim against her own insurer for underinsurance coverage after settling with the tortfeasor for less than the tortfeasor's insurance policy limits. Arrell J. reached this decision on the basis that the plaintiff did not obtain the consent of her own insurer when she settled with the at-fault driver for an amount less than the limits available under the at-fault driver's insurance policy. The court in Sadhu distinguished this situation from the situation in the case of Somersall v. Friedman, [2002] 3 S.C.R. 109, [2002] S.C.J. No. 60, 2002 SCC 59.

[23] In Somersall, the plaintiff sued the at-fault driver who was underinsured and the plaintiff entered into a limits agreement whereby the insurer for the at-fault driver paid its total available limit and it admitted liability. In exchange for this, Somersall agreed not to pursue the at-fault driver personally for any damages awarded in excess of the policy limits of the at-fault driver. The plaintiff then began her action against her own insurer under the (SEF 44) Endorsement for damages in excess of the limits of the insured's of the at-fault driver. In Somersall, the plaintiff's own insurer took the position that the plaintiff was precluded from seeking damages from his insurer because of the plaintiff's agreement with the at-fault driver. In the event, the Supreme Court of Canada disagreed and allowed the action. Arrell J. distinguished Driver from Somersall in that the full limits of the tortfeasor's insurance were not paid and a full and final release had been executed. He specifically noted that there was no evidence before him that the tortfeasor was inadequately insured and in fact he had more than enough coverage to satisfy the actual settlement amount. In addition, Arrell J. found there was no evidence in the Pilot case that the plaintiff had settled for an amount less than her claim, taking into account all relevant settlement considerations: see paras. 18-20.

[24] The moving party submits that the responding parties should not be able to rely on the bald allegation that L.G.I.C., the insurer for the at-fault Florida defendant, was potentially insolvent when the responding parties or their representatives did not conduct a due diligence in order to decide whether or not the policy limits were unavailable. [page477]

[25] In the alternative, the moving party argues that if the responding parties are found to be entitled to proceed with an action for underinsurance coverage against the moving party, then the moving party is entitled to a deduction of US$1 million, being the full third-party liability limits of the Florida defendant. In aid of this position, the moving party submits there is no evidence that the policy limits under the L.G.I.C. policy were unavailable at the time of the Settlement and that the coverage under the L.G.I.C. policy was more than enough to satisfy the Settlement amount of $300,000 obtained by the responding parties. In addition, the moving party points out there has not been any legal determination made with respect to the availability of the L.G.I.C. policy limits and, accordingly, the L.G.I.C. policy limits had never been reduced by any operation of law and it remained at US$1 million at the time of the Settlement. In this regard, the moving party points out that the answers by L.G.I.C. to written interrogatories in the Florida action expressly stated that the policy limits were US$1 million, there were no coverage issues, and further that L.G.I.C. had never amended, modified or supplemented the answers to the written interrogatories even though it had reserved its right to do so.

[26] Counsel further submits there is no evidence that the responding parties sought to conduct due diligence to determine the true financial state of L.G.I.C. at the time of the Settlement nor that the Settlement offer made by L.G.I.C. and its insured in the Florida action could not be held over or suspended for a reasonable period of time in order to give the responding parties time to investigate the true financial state of L.G.I.C. as an insurer.

[27] Finally, the moving party's position is that if the responding parties had been told by the Florida defendant (N.D.) or any of its representatives that L.G.I.C. was facing potential insolvency (which was not the fact), then the written terms of the Full and Final Release expressly indicate that the responding parties did not rely on such a representation in arriving at the Settlement.

[28] The moving party then deals with the operation of rule 20.04(2) of the Rules of Civil Procedure pertaining to summary judgment motions.

[29] Counsel for the moving party refers at length to the principles set out in Hyrniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7, and in particular the court's guidelines for the proper interpretation of Rule 20. The court states in Hyrniak that, in accordance with the provisions of rule 20.04(2)(a), a summary judgment motion must be granted whenever there is [page478] no genuine issue requiring a trial. Counsel refers to the following excerpts from the judgment:

(1) "There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result": paras. 47, 49 and 50.

(2) "On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new factfinding powers [pursuant to Rule 20.04(2.10)]. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a)": para. 66.

[30] As noted above, counsel for the moving party submits that the responding parties have not proven on a balance of probabilities the accident was caused by an inadequately insured motorist and have not proven on a balance of probabilities that the policy limits of the Florida defendants were unavailable at the time of settlement. Under these circumstances, the position of the moving party is that there is no genuine issue requiring a trial, and in the result the moving party is entitled to summary judgment dismissing the responding parties' action.

The position of the responding party

[31] Counsel refers to s. of the OCPF 44R Endorsement, which provides that the insurer shall indemnify an eligible claimant for the amount the claimant is "legally entitled" to recover as compensatory damages from an inadequately insured motorist. Counsel notes that the words "legally entitled" are not defined.

[32] Counsel for the responding party states that in Somersall, the court was asked to interpret the meaning of "legally entitled" words as used in the subject Endorsement. Counsel contends the court considered the operative point in time to trigger the legal entitlement of the claimant and the corresponding insurer's obligation to pay was at the time of the accident. The court held that an insured must show that he or she is legally entitled to recover from the inadequately insured driver at the time of the accident and in so doing must satisfy two conditions: first, the fault of the insured motorist, and second, the quantum of damages.

[33] Counsel points out that in Somersall, the plaintiff had released the at-fault driver, the owner of the subject vehicle, and [page479] the tortfeasor's insurance in circumstances where his or her own insurer had not consented to the settlement. Counsel also refers to s. 7 of the endorsement with particular reference to the words the amount payable for underinsurance coverage is "excess to an amount received" and "is excess to amounts that were available" to the eligible claimant. (Emphasis added)

[34] Counsel cites the case of Petrasso v. State Farm Insurance Co., [2010] O.J. No. 2281, 2010 ONSC 3085 (S.C.J.), in which the court rejected the argument that a tortfeasor cannot be said to be inadequately insured once the injured party settles his or her claim below the tortfeasor's policy limit.

[35] Counsel develops this idea by contending that a reasonable interpretation of the language of s. 7 of the Endorsement was that the "amount received" and "amounts available" are to be considered in determining the amount payable and that the amount payable would be excess to the full limit of the tortfeasor's policy. The court in Petrasso, according to counsel for the responding party, says that the responding parties' settlement at less than the policy limit does not disentitle the responding parties from recovering excess coverage and there are no words in s. 7 which would operate as a bar to a plaintiff from bringing a claim on the basis that he or she did not "receive" all of the funds under the insurance policy of inadequate or insufficient coverage.

[36] In essence, it is contended that s. 7 does not require that the claimant exhaust the at-fault driver's policy limits.

[37] Counsel further submits the case at bar is distinguishable from other cases in that there is no other fact situation where the tortfeasor's insurer became insolvent or otherwise incapable of paying the claim in circumstances where the tortfeasor was insured at the time of the accident. The responding parties' position is that the limits of the policy were unavailable in the circumstances and that a settlement for less than the policy limits was provident.

[38] The responding parties in dealing with the rule 20.04(2.1) issues as to the requirement of a trial in this matter is quite simply that there is a genuine issue or issues requiring a trial in that a trial is required to appropriately weigh the credibility of the responding parties whose evidence respecting the circumstances surrounding the Settlement will be determinative of the issues in the action against the moving party.

Analysis

[39] I accept the position and arguments in support of the position taken by the moving party and reject the position and [page480] the arguments in support of the position taken by the responding party.

[40] The proper interpretation of the language used in the Endorsement is more properly set out in the case of Sadhu than in Somersall. The facts in Sadhu essentially are on all fours with the situation in this case. I accept and adopt the reasoning of Arrell J. in distinguishing the case in Sadhu from the case of Somersall. In particular, I reject the argument made by counsel that the responding parties' counsel in the Florida action did conduct due diligence; a bald statement that such counsel provided documentation in support of the proposition that L.G.I.C. was going to go bankrupt is unsupported by any evidence.

[41] It is no answer by the responding parties that counsel for the moving party had authorization to speak directly to plaintiffs' counsel in the Florida action and that the moving party had every opportunity to obtain particulars with respect to the mediation and Settlement. This submission appears to be some form of estoppel argument being raised by the responding parties for use as a sword rather than a shield; I reject the same.

[42] I also reject the argument that the credibility of the responding parties with respect to their evidence as to circumstances surrounding the settlement of the Florida action will be determinative of the issues in this action. Absent some evidence of an attempt by the responding parties or their representatives to establish a basis for a limits agreement with the moving party, I am not persuaded that their credibility will have any determinative effect on the issues arising in this motion.

Disposition

[43] In the above circumstances and for the above reasons, an order shall issue dismissing the responding parties' action pursuant to Rule 20 of the Rules of Civil Procedure.

[44] I will entertain written costs submissions by the parties not to exceed four (4) pages (exclusive of supporting materials) according to the following schedule:

(1) By the moving party, within 30 days from the date of this endorsement;

(2) By the responding parties, within ten days from the date of receipt of the moving parties' submissions; and

(3) By the moving party, within ten days of receipt of the responding parties' responding submissions.

Motion granted.

End of Document