Uninsured and Underinsurance Coverage
Automobile insurance policies are standardized, with many companies following the Ontario Automobile Policy 1 (“OAP 1”) as their benchmark.
Mandated through section 265 of Ontario’s Insurance Act, every policy in Ontario must include uninsured and underinsured automobile coverage to protect individuals from those driving without proper insurance.
265 (1) Every contract evidenced by a motor vehicle liability policy shall provide for payment of all sums that,
(a) a person insured under the contract is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injuries resulting from an accident involving an automobile;
subject to the terms, conditions, provisions, exclusions and limits as are prescribed by the regulations.
Insurance Act, R.S.O. 1990, c. I.8.
These coverages exist within the injured insured’s, own insurance policies. While they are similar in function, they are technically distinct:
- Uninsured coverage protects you if the at-fault driver does not have valid liability insurance. This coverage will also apply in accidents with unidentified motorists (i.e. hit-and-run).
- Underinsured coverage becomes operational when the at-fault driver’s liability limits are too low to cover the assessed damages. The limit of this coverage is the difference between the liability insurance limit of your policy and that carried by the motorist at fault. For instance, if you are awarded $300,000, but the at-fault driver’s liability limits are $200,000, then your policy would kick in the outstanding $100,000.
- Insuring Agreement: 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.
While the statutory policy minimum is $200,000, it may be increased to $1,000,000 by purchasing optional benefits through the OPCF 44R endorsement. Although not mandatory, this endorsement has become standardized and is the norm.
In order to apply, there must be no liable drivers with insurance coverage. This incorporates the 1% Rule into the coverage: If there is an insured driver who is at least one percent liable, then the coverage does not apply. This is because under the Negligence Act, a plaintiff can fully recover their damages from the other at-fault and insured vehicle.
If there are no liable drivers with valid insurance coverage, then all the plaintiff must prove under s. 265, is that they are ‘legally entitled to recover’. This phrase is essentially a coverage provision that has been interpreted to permit a direct action against the insurer and requires that the insured person both (1) establish fault on the part of the uninsured driver and (2) prove the amount of his or her damages (Loftus v Robertson, 2009 CanLII 92137 (ON CA)).
Underinsurance in the Case Law
The main issue that could reduce access to underinsurance, is the limits provision and whether “an insurer’s liability under a policy is reduced by operation of law to the statutory minimum limits in a jurisdiction because of a breach of the Policy.” It has been determined that (1) settlement (Maccaroni v Kelly, 2011 ONCA 411) and (2) contractual agreement not to pursue (Somersall v Friedman, 2002 SCC 59 ) does not count as ‘operation of law.’ So, if you settled at the limit or agree not to pursue the individual beyond the limit, you are not barred from your underinsurance coverage.
Somersall v Friedman, 2002 SCC 59 is the leading case on OPCF 44R endorsement and underinsurance coverage. In that case, the plaintiffs were struck and injured by an underinsured motorist. After coming to an agreement not to pursue the defendant beyond their policy limits, they decided to seek the rest of their compensation through their own policy. The insurance company challenged the agreement and refused to pay their claim. The court determined that:
“This agreement had no bearing at all on the right of the insured against the tortfeasor at the time of the accident; it did not exist at the time of the accident. It may be useful as evidence, in the plaintiffs' favour, of the fault of the tortfeasor, as an admission of fault was part of the agreement reached. But the promise by the plaintiffs not to pursue Friedman beyond his policy limits does not have any other bearing on any question of the legal entitlement [of the coverage].”
Somersall v Friedman, 2002 SCC 59.
This follows the rationale that underinsurance coverage is meant to close the gap between an at-fault driver’s limits and the damages. Therefore, as an insured driver, you need not pursue the at-fault party personally in order to access your own uninsured or underinsurance coverage. You need only reach the limit.
In Maccaroni v Kelly, 2011 ONCA 411 , the insurer alleged that a breach of statutory conditions occurred, meaning that they could use section 258(11) of the Insurance Act to reduce its liability to the statutory minimum. The plaintiffs soon thereafter settled their action with the tortfeasors and the insurer. They attempted to claims the rest of their damages through uninsured provisions and were successful. The court determined that because they reached the limit, the plaintiffs' settlement did not necessarily bar their right to pursue their own insurer for damages claimed above the settlement figure. They sent the case back to trial, but it was settled prior to its commencement.
Uninsured and underinsurance coverages protect individuals who get into an accident with an inadequately insured motorist. While access to these policies will continue to be a point of contention, the case law has interpreted the coverage broadly and in favour of the injured, insured party.
Insurance Act, RSO 1990, c I.8,
Negligence Act, RSO 1990, c N.1,
Loftus v. Robertson, 2009 CanLII 92137 (ON CA),
Maccaroni v. Kelly, 2011 ONCA 411 (CanLII),
Somersall v. Friedman, 2002 SCC 59 (CanLII), 3 SCR 109,
Maccaroni v. Kelly, 2011 ONCA 411 (CanLII),