Court of Appeal: Injured Insureds Do Not Need to Sue Insured Joint Tortfeasors to Claim Uninsured Motorist Coverage

In a somewhat surprising decision, the Court of Appeal for Ontario has held that an insured motorist does not have to sue insured joint tortfeasors in order to collect on the uninsured coverage in her own automobile insurance policy. Also the insurer does not appear to have a right of subrogation against the joint tortfeasors but only against the uninsured motorist.

This decision is properly understood as providing reasonable coverage for an insured from her insurer. It is a first party claim, not third party claim. The insured purchased coverage for this very type of situation from her insurer. The insurer picked a bad set of facts in this case and should have waited for a better case to pursue this issue - namely, where the joint tortfeasor was at least 25% liable. In this instance it is not even certain that the joint tortfeasor was 1% liable.

The decision is Loftus v. Security National, 2009 ONCA 618 (decision released Aug 21, 2009). Click here for a copy of the decision.

The plaintiff was injured after being hit by an uninsured motorist. The uninsured motorist was being chased by the police when he entered an intersection, lost control and struck the plaintiff.
The plaintiff sued the uninsured motorist and her own insurer, Security National, under the uninsured coverage of her policy. The uninsured motorist did not defend.

At first instance, on a Rule 22 motion, MacDougall J. found that Security National was liable to pay the plaintiff under the uninsured provisions of the policy, even though she had not commenced an action against the police/joint tortfeasors and even if the police/joint tortfeasors are assumed to be negligent.

The Court of Appeal for Ontario reviewed the relevant wording of the Uninsured Automobile Coverage Schedule ("the Schedule") contained in R.R.O. 1990, Reg. 676:

2. (1) The insurer shall not be liable to make any payment,

(b) where a person insured under the contract is entitled to recover money under any valid policy of insurance other than money payable on death, except for the difference between such entitlement and the relevant minimum limits determined under clause (a);

(c) where the person insured under the contract is entitled to recover money under the third party liability section of a motor vehicle liability policy;

The Court of Appeal then held that the key phrase herein is "entitled to recover money". The question then is whether the plaintiff is "entitled to recover money". If yes, then she cannot recover under the uninsured provisions of her own policy.

The Court of Appeal answered the question by finding that the phrase "entitled to recover" as it appears in ss. 2(1)(b) and (c) of the Schedule means entitled to recover "in fact" as opposed to entitled to recover "in law" and that an "injured insured is entitled to recover in fact only where a potential joint tortfeasor’s insurer admits liability to pay or where the injured insured obtains judgment against the insured joint tortfeasor."

The Court of Appeal went on to say that:

"We see no indication in the language of s. 265 of the Insurance Act or of the Schedule that it was the intention of the legislature to require victims of uninsured drivers to engage in potentially speculative and costly litigation against potential joint tortfeasors who may be insured rather than relying on the coverage paid for in their own policies of insurance."

The Court of Appeal also rejected submissions by Security National that this finding would result in double recovery by the insured. The Court of Appeal held that "recovery under the uninsured coverage is an alternative" and that obtaining judgment against her own insurer signifies an election not to subsequently pursue a claim against the joint tortfeasors.

The Courts in this instance simply did not want to find liability against the police for what was clearly the fault of the uninsured motorist and nor did the Courts want to punish the insured for refusing to pursue litigation against the police. The insured purchased auto insurance from the insurer for this very situation.