Auto policy takes priority over excess liability policy in crash involving underinsured driver

Auto liability coverage from a Family Protection Endorsement in Ontario (OPCF 44R) takes priority over a personal liability umbrella policy (PLUP) in collisions involving underinsured motorists, the Ontario Court of Appeal has ruled.

In cases involving an underinsured motorist, Section 7(a) of the OPCF 44R says the policy provides coverage in “excess to….insurers of the inadequately insured motorist.”

The appeal court clarified the word ‘insurers’ in this section of the endorsement refers specifically to auto insurers and auto insurance policies, not just any kind of insurers or policies, such as a PLUP.

“I agree with the interpretation of the motion judge that s.7 refers to matters covered in the automobile regulations or motor vehicle liability policies,” Ontario Appeal Court Justice Darla Wilson wrote on behalf of a unanimous panel of three judges.

“The language of s.7 makes it clear that amounts available to the claimant from ‘insurers of the inadequately insured motorist’ mean amounts from the total motor vehicle liability insurance or funds in lieu of insurance, not any and all types of insurance such as a PLUP.”

In Rodriguez-Vergara v. Lamoureux, Manuel Rodriguez-Vergara was struck by a vehicle owned by Maria D’Souza and driven by her daughter, Rachelle Lamoureux, in February 2017. Vergara suffered injuries and commenced a lawsuit against D’Souza and Lamoureaux seeking damages.

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RSA covered Vergara with a standard auto policy that had liability limits of $1 million. Attached to the policy was a Family Protection Endorsement, OPCF 44R, which provides coverage if the insured is involved in a collision with an underinsured motorist.

Certas insured D’Souza’s vehicle under a standard automobile policy with liability limits of $300,000. Certas also insured D’Souza under a personal umbrella liability policy that had limits of $1 million.

All parties agreed Vergara’s damages exceeded D’Souza’s $300,000 auto policy limit. Therefore, Lamoureux and D’Souza were inadequately insured motorists.

But the insurers disputed which policy came next in priority sequence — RSA’s OPCF 44R, for underinsured motorists, or Certas’ personal liability umbrella policy, which also had a $1-million limit.

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RSA argued before a trial judge that the OPCF 44R kicks in as ‘excess’ insurance once coverage offered by all “insurers of the inadequately insured motorist” have been exhausted.

The trial judge found otherwise, saying that the word ‘insurers’ in the OPCF 44R endorsement refers only to auto insurers and the auto insurance policies of the inadequately insured motorist. The trial judge found Certas’ umbrella policy was not an auto policy, and therefore came second to RSA’s family protection endorsement in priority order.

Certas was ordered to pay the first $300,000. Vergara’s OPCF 44R from RSA would follow next, with coverage up to $700,000, followed by D’Souza’s PLUP.

RSA challenged the trial judge’s order at the Ontario Court of Appeal. It also sought a ruling on whether RSA could subrogate against Certas and its PLUP to recover funds paid under the OPCF 44R.

The Appeal Court ruled the trial judge made no error.

“I agree with the interpretation of the motion judge that s.7 [of the OPCF 44R] refers to matters covered in the automobile regulations or motor vehicle liability policies,” Justice Wilson wrote. “The language of s.7 makes it clear that amounts available to the claimant from ‘insurers of the inadequately insured motorist’ mean amounts from the total motor vehicle liability insurance or funds in lieu of insurance, not any and all types of insurance such as a PLUP.”

The Appeal Court also ruled RSA could not subrogate against Certas’s PLUP to recoup the amount it paid under the OPCF 44R. If it allowed subrogation, that would lead to an ‘absurd’ result, the court said in its decision released yesterday.

“To accede to RSA’s argument would enable RSA as the OPCF 44R carrier to ‘get through the back door of subrogation what it cannot get through the front door of priority,’” Wilson wrote.

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.