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Claimant entitled to SEF 44 coverage but not his incurred U.S. legal fees

Hartley v Security National Insurance Company 2017 ONCA 715

Glen and Theresa Hartley were injured in a traffic accident while touring on a motorcycle in Minnesota in the US. They retained solicitors in Minnesota and commenced an action related to their motor vehicle accident.

The Defendant vehicle was owned by the State of Minnesota, which was self insured and state laws provided that the State’s self insurance had a single occurrence limit of $1,500,000 (USD), however limited the amount payable to one claimant to $500,000(USD).

Mr. Hartley suffered damages in excess of $500,000 but obtained a settlement of only $500,000. The limit of $500,000 was inclusive of legal costs and disbursements. After paying his solicitors, Mr. Hartley was left with a recovery of approximately $386,500 (CAD).

Mr. Hartley had personal motor vehicle insurance which included Family Protection Coverage (SEF 44) in the amount of $1,000,000. He made a claim against the SEF 44, claiming that he had only been compensated in the amount of $386,500 (CAD).

The SEF 44 insurer denied coverage, finding that as the self insurance had a single occurrence limit of $1,500,000, this was above the amount of the SEF 44 and also arguing that as the amount was mandated by law, that the Defendant was not “underinsured”.

There was a motion filed by the parties to resolve two legal issues 1) whether the State of Minnesota was an “inadequately insured motorist” and 2) whether Mr. Hartley could recover his legal expenses against the SEF 44 insurer.   The motion’s judge found there was an inadequately insured motorist and that Mr. Hartley could recover his legal expenses. The insurer appealed.

The Court found that the SEF 44 policy wording was unambiguous and the term “inadequately insured motorist” was to be given its ordinary meaning. The court held that the policy is meant to put an insured in the same position they would have been in had a liable underinsured motorist carried automobile insurance available to cover the insured’s damages in the same amount as the SEF 44 policy. The Court upheld the finding that the defendant was an “inadequately insured motorist” so as to trigger coverage under the SEF 44.

The Court of Appeal did however overturn the decision on the question of legal expenses.

The Court noted that the SEF 44 wording provided that the amount payable under the policy would be the amount of damages (up to the policy less) minus all funds obtained as compensation from the inadequately insured motorist. In the present case, the Plaintiff was entitled to receive up to $500,000 (USD) for his damages as compensation, which he did receive. The policy provided for no deductions from that amount for legal fees, unless the legal fees were awarded as a separate special expense.

You can read Hartley v Security National Insurance Company 2017 ONCA 715, in its entirety here.

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