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Clarification on Underinsurance Limits Comes as a Relief to Insurers

4 minute read

The recent Ontario Court of Appeal decision in Tuffnail v. Meekes, 2020 ONCA 340 may have auto insurers in the province breathing a sigh of relief. The court held that even where a plaintiff fails to sue all possible tortfeasors, insurance coverage held by a known potential tortfeasor could be considered “available” to the plaintiff for the purpose of calculating amounts payable pursuant to underinsurance coverage.

The decision arose out of a set of complex facts, a lengthy trial, a series of post-trial motions, and three appeals on five separate issues. In brief, the plaintiff, Mr. Tuffnail, was a passenger critically injured in a single-vehicle accident. The driver was impaired and had been served alcohol by Mr. Coulthard, the bartender at a wedding. Tuffnail sued the driver and the host of the wedding, but not Coulthard. The host and Tuffnail’s underinsurance provider, State Farm, brought third party claims against Coulthard for contribution and indemnity. At trial, the jury apportioned liability among each of Coulthard, the driver, the host, and Tuffnail.

Tuffnail held an Ontario Policy Change Form (OPCF) 44R from State Farm. This type of optional policy entitles the insured to compensation should the at-fault party’s liability be insufficient to cover damages. In this case, the driver was underinsured. Accordingly, Tuffnail sought to recover from State Farm as underinsurance provider.

Pursuant the terms of the OPCF 44R, the amount payable by State Farm to Tuffnail was excess to “an amount received by the eligible claimant from any source … and is excess to amounts that were available to the eligible claimant from” nine enumerated sources. The relevant section provided:

7. The amount payable under this change form 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

(b) the insurers of a person jointly liable with the inadequately insured motorist for the damages sustained by an insured person;

The trial judge held that Coulthard’s insurance coverage was not “available” to Tuffnail for the purpose of the amount payable calculation because Tuffnail had not claimed against Coulthard. Accordingly, Coulthard’s insurance coverage was not deducted from State Farm’s liability to Tuffnail, and State Farm was ordered to pay its full limits to Tuffnail in the amount of $800,000. Peter Kryworuk and Jacob Damstra of Lerners LLP acted for State Farm on the appeal.

In a unanimous decision written by Associate Chief Justice Hoy, the court allowed the appeal on this issue, finding that “Coulthard is ‘jointly liable’ to Tuffnail within the meaning of s. 7(b), his insurance is ‘available’ to Tuffnail within the meaning of s. 7(b), and accordingly, State Farm is entitled to deduct the limits of Coulthard’s insurance coverage in calculating the amount it is required to pay to Tuffnail.”[1]

State Farm’s third party claim against Coulthard was in the form of a subrogated claim on behalf of Tuffnail. The court provided commentary about the appropriateness of framing claims in this manner and determined that it was appropriate to do so in this case.[2] State Farm’s subrogated claim effectively put Coulthard’s liability to Tuffnail in issue, despite the fact that Tuffnail had not claimed against Coulthard himself. The court held that in finding that State Farm had a right of subrogation against Coulthard, the trial judge necessarily found that Coulthard was jointly liable with the driver: “[i]f Tuffnail did not have a claim against Coulthard, State Farm did not have a right to subrogate.”[3]

Because Coulthard was jointly liable for Tuffnail’s damages with the driver, his insurance was “available” to Tuffnail and therefore properly deducted from the amount payable by State Farm to Tuffnail pursuant to section 7 of the OPCF 44R. This reduced the amount payable by State Farm by more than half, from $800,000 to $347,454.71.

Although nothing in the court’s decision requires a plaintiff to sue all possible tortfeasors, it could change the implications of a plaintiff’s choice not to do so.  Amounts payable pursuant to underinsurance policies may be reduced by the insurance coverage held by those potential tortfeasors if they are found to be jointly liable with the inadequately insured motorist, whether or not they are named by the plaintiff.


With thanks to Lerners LLP summer student, Andrei Teju, for his contributions.

[1] Para. 24.

[2] Paras. 39-48.

[3] Para. 38.

Jane Scholes

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