Hartley v. Security, 2016 ONSC 1812
CITATION: Hartley v. Security, 2016 ONSC 1812
COURT FILE NO.: C-167-12
DATE: 2016-03-14
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Glen C. Hartley and Theresa M. Hartley, Plaintiffs
AND:
Security National Insurance Company, Defendant
BEFORE: G. E. Taylor
COUNSEL: Richard Campbell, Counsel, for the Plaintiffs William Woodward, Counsel, for the Defendant
HEARD: March 7, 2016
ENDORSEMENT
Introduction
[1] The plaintiffs were involved in a motor vehicle accident in Minnesota, U.S.A. on August 24, 2010. They sustained serious personal injuries in that accident. The plaintiffs retained counsel in Minnesota and an action for damages was commenced. The action was settled for a total payment of $600,000 allocated as $500,000 for the claims of Glen Hartley and $100,000 for the claims of Theresa Hartley. The plaintiffs received the sum of $463,889.18 after deducting attorneys’ fees and out-of-pocket expenses.
[2] The plaintiffs commenced the present action against their insurer in Ontario. In this action, the plaintiffs claim under-insurance coverage pursuant to the OPCF-44R Family Protection Coverage endorsement. The coverage available to the plaintiffs pursuant to the policy of insurance issued by the defendant is $1 million.
[3] There are two aspects to the present motion. The plaintiffs seek to amend the Statement of Claim to assert an under insured claim on behalf of Glen Hartley for the difference between the settlement amount in the Minnesota action and the limit of insurance in the policy issued by the defendant and to claim the costs and attorney fees paid by both plaintiffs in respect of the settlement of the Minnesota action as special damages in the current action. The motion also seeks an order pursuant to Rule 21 of the Rules of Civil Procedure to determine questions of law raised by the pleadings. The two questions of law questions posed in the Notice of Motion are as follows:
(a) Are the legal expenses incurred by the plaintiffs in the commencement and resolution of the Minnesota action arising out of the index motor vehicle accident properly claimed as against the defendants [sic] in the Ontario proceeding as special damages, or are they otherwise recoverable from the defendant in the Ontario proceeding, and if the answer to either is in the affirmative, in what proportion or what amount?
(b) Where [sic] the defendants in the Minnesota action “underinsured” as that term is defined in Ontario, and if so to what extent?
[4] The Motion Record contains an affidavit sworn by Glen Hartley to which are attached many documents including the Complaint issued in Minnesota, the Settlement Agreement with respect to the Minnesota proceeding and correspondence between plaintiffs’ counsel in Ontario and the attorneys who represented the plaintiffs in the Minnesota action.
[5] In its Factum of the defendant seeks summary judgment dismissing the plaintiffs’ claims although no Notice of Motion for summary judgment has been served. The Factum of the defendant also states at paragraphs 21 and 22 that no evidence is permissible on a motion brought pursuant to Rule 21 except with leave or on consent. The defendant points out that the Notice of Motion does not request leave to introduce evidence on the motion nor has the consent of the defendant been sought.
[6] At the outset of the argument on the motion, both counsel requested that I answer the two questions posed in the Notice of Motion in order to assist the parties in the present action going forward. I therefore propose to grant the amendments sought to the Statement of Claim and grant leave to consider the evidence which has been presented on the motion. That will allow me to answer the questions which both counsel have asked me to do.
Statutory Provisions
[7] The following provisions of OPCF 44R are relevant:
1.1.5 “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;
In consideration of a premium of $.... or as stated in the Certificate of Automobile Insurance to which this 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.
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 guarantees as required by law in lieu of such insurance, of the inadequately insured motorist and any other person jointly liable with that motorist.
The amount payable to an eligible claimant under this change form shall be calculated 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 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 coverage as determined under Sections 4 and five of this change form.
In determining any amounts and eligible claimant is entitled to recover from an inadequately insured motorist, no amount shall be included with respect to costs
The Position of the Plaintiffs
[8] The plaintiffs say that because the Minnesota statute limits the recovery of an individual plaintiff to $500,000, Minnesota is an inadequately insured motorist and therefore they ought to be entitled to recover from the defendant pursuant to the Family Protection Coverage endorsement the difference between their actual damages up to the policy limit of $1 million and what was received in settlement of the Minnesota action. The plaintiffs also say that they should be entitled to recover as special damages in the present action the costs and attorney fees which were incurred in commencing and subsequently settling the Minnesota action.
The Position of the Defendant
[9] The defendant disputes that Minnesota is underinsured. The defendant says that the limitation on payment to an individual claimant in Minnesota is not the equivalent of being underinsured. The defendant points to the provision of the Minnesota statute which limits the liability of Minnesota to $1,500,000 for all claims arising out of a single accident. The defendant says that in fact there was a total of $1 million available to the plaintiffs collectively for compensation for the injuries sustained in the motor vehicle accident which equates to the limit of insurance in the policy issued to the plaintiffs. With respect to the issue of the costs and attorney fees incurred in Minnesota, the defendant submits that Family Protection Coverage endorsement indemnifies for compensatory damages and costs are not compensatory damages.
Discussion
[10] The purpose of the Family Protection Coverage endorsement is described in Chomos v. Economical Mutual Insurance Company, 2002 CanLII 45021 (ON CA), [2002] O.J. No. 3164 at paragraph 20 as follows:
The OPCF 44 is optional insurance coverage available to Ontario drivers on payment of an additional premium. Its purpose is to provide coverage where a person is injured by an underinsured or inadequately insured motorist. As observed by Rutherford J. in Despotopoulos v. Jackson, [1991] O.J. No. 1472, [1992] I.L.R. para. 1-2793 (Ont. Gen. Div.), at p. 1646:
[U]nderinsured coverage was conceived to provide financial relief for insureds and their families from the hardships and inequities of any shortfalls in insurance compensation. If an insured person with underinsurance protection became the victim of the negligence of a person insured with third party liability limits lower than his own limits, the insured could expect to be indemnified for the shortfall ... [some citations omitted]
[11] In this case, the plaintiffs purchased the Family Protection Coverage endorsement so as to have available insurance up to a limit of $1,000,000 in the event they were injured by an at fault motorist whose insurance coverage was less than their $1 million policy limit. The maximum amount payable to Glen Hartley pursuant to the Minnesota statute was $500,000. That is the amount for which he settled his claim in the Minnesota action. To the extent that his damages are proven to exceed $500,000, it is my view that he would have available coverage pursuant to the Family Protection Coverage endorsement of the difference between the limit available pursuant to the policy issued by the defendant and the amount of the settlement of the Minnesota action.
[12] With respect to Theresa Hartley, she settled her damage claim in the Minnesota action for $100,000 which was less than the limit of liability in the Minnesota statute. Therefore, in my view, it cannot be said that the at fault driver and the state of Minnesota were inadequately insured in relation to her claims: Sadhu v. John Driver, 2009 CanLII 18669 (ON SC), [2009] O.J. No. 1655.
[13] I do not accept the submission that the total of the amounts available to both plaintiffs based on the Minnesota statute determines the amount available to Glen Hartley pursuant to the Family Protection Coverage endorsement. It was submitted that “the total of all limits” referred to in section 4 of the Family Protection Coverage endorsement is at least $1 million. This was the total amount available to the Hartleys pursuant to the Minnesota statute. That interpretation is not correct. The “total of all limits” is with respect to insurance coverage available to the inadequately insured motorist “and any other person jointly liable with that motorist”. The “total of all limits” does not mean the total of the amounts payable to each individual claimant. This interpretation is consistent with the interpretation of the same clause in Gostick v. Squance, 2007 ONCA 674, [2007] O.J. No. 3776 where Doherty J.A. of the Ontario Court of Appeal paraphrased the wording in section 4 as follows at paragraph 20:
Royal's maximum liability under this FPC Endorsement, regardless of the number of respondents injured, is the amount by which the limit of the FPC Endorsement exceeds the total of Mr. Squance's [the at fault motorist] motor vehicle liability insurance limits plus the liability limits of anyone else's insurance who is jointly liable with Mr. Squance.
[14] Because Theresa Hartley does not have a claim pursuant to the Family Protection Coverage endorsement she likewise is prohibited from pursuing a claim for recovery of the expenses incurred in obtaining her settlement in Minnesota.
[15] In Green v. State Farm Mutual Automobile Insurance Company, 2009 CanLII 33049 (ON SC), [2009] O.J. No. 2713, it was held that the full amount of the settlement from the foreign jurisdiction, as opposed to the net amount received after deduction of fees and expenses, is the amount which is to be deducted from the coverage available to determine the amount of underinsurance available to the eligible claimant pursuant to the Family Protection Coverage endorsement. Boswell J. then stated at paragraph 25 that the plaintiff could include as part of a claim for special damages the expenses incurred to obtain the settlement with the underinsured motorist.
[16] In Anand v. Belanger, 2010 ONSC 5356, [2010] O.J. No. 4064 Stinson J., when interpreting the provisions of s. 267.8 of the Insurance Act, came to the conclusion at paragraph 33 that “payments in respect of the incident that the plaintiff has received” means the net amount received by the plaintiff after deduction of legal fees. He specifically disagreed by the approach taken by Boswell J. in Green.
[17] Section 13 of the Family Protection Coverage endorsement provides that in determining the amount an eligible claimant is entitled to recover from an inadequately insured motorist, no amount shall be included for costs. I interpret this to mean that costs payable by the inadequately insured motorist in respect of proceedings commenced against the inadequately insured motorist are not to be included in calculating the amount payable pursuant to the Family Protection Coverage endorsement. That is consistent with costs of being over and above policy limits in the standard Ontario automobile insurance policy.
[18] Notwithstanding the criticism of Green by Stinson J. in Anand, I have decided to follow the approach taken in Green. Firstly, Green dealt with the interpretation of the Family Protection Coverage endorsement. Secondly, costs payable by an insurer as part of a settlement of a claim are generally less than the amount charged by the solicitor for obtaining the settlement. In the present case, the evidence is that the Minnesota attorneys applied a contingency of 22 percent of the overall settlement plus out-of-pocket expenses in determining the amount of their account to the plaintiffs in relation to the Minnesota action. There is no evidence as to what amount, if any, was contributed in costs by the state of Minnesota to the settlement with Glen Hartley. It therefore seems appropriate to me that the approach taken in Green should be followed in the present case. Costs incurred in relation to the Minnesota action should be claimable as a special damage. This will allow Glen Hartley to prove the amount which was paid by Minnesota as costs of the action.
Summary and Conclusion
[19] I therefore answer the questions posed in the Notice of Motion as follows:
(a) Are the legal expenses incurred by the plaintiffs in the commencement and resolution of the Minnesota action arising out of the index motor vehicle accident properly claimable as against the defendants in the Ontario proceeding as a special damage?
Answer: With respect to the claim of Theresa Hartley, no. With respect to the claim of Glen Hartley, provided the gross amount of the settlement in the Minnesota action is deducted from the limit of insurance available pursuant to the Family Protection Coverage endorsement, yes.
(b) Were the defendants in the Minnesota action “underinsured” as that term is defined in Ontario, and if so to what extent?
Answer: With respect to the claim of Theresa Hartley, no. With respect to the claim of Glen Hartley, yes. I decline to answer the addendum to the question: “and if so to what extent?”
[20] For the foregoing reasons, there will be an order that the plaintiffs are at liberty to amend the Statement of Claim as per the draft attached to the Notice of Motion. The questions posed in the Notice of Motion are answered as stated above.
[21] If counsel are unable to agree on the appropriate disposition as to costs they may make written submissions. The written submissions on behalf of the plaintiffs are to be delivered to my office within 14 days of the release of this Endorsement, not to exceed three pages in length exclusive of a Bill of Costs and Costs Outline. Responding submissions are to be delivered to my office within 28 days of the release of this this Endorsement, not to exceed three pages in length.
G. E. Taylor J.
Date: March 14, 2016