Somersall v Scottish & York

jptardif2jptardif2
in Land.Cases

Hi Graham,

I have very little knowledge regarding auto insurance, but what would have happened if the non-responsible injured driver hadn't gotten into a limits agreement with the under-insured motorist? I am trying to understand how that detail makes this 'routine' situation such a big deal.

Thanks!

Comments

  • grahamgraham

    The injured party and the at-fault driver probably entered into this "limits agreement" as a way to expedite settlement. The problem is that this agreement has implications for the subrogation rights of the injured party's insurer. Here's what's going on:

    • If your insurer compensates you for injuries that were the fault of the other driver, then your insurer will try to get reimbursed by the at-fault driver.
    • If the at-fault driver has sufficient insurance, their insurer would pay your insurer.
    • If the at-fault driver doesn't have sufficient insurance, the at-fault driver could be sued by your insurer.

    If there had not been a "limits agreement", that would have been the end of it. The at-fault driver would have been sued and would have had to reimburse your insurer for whatever your insurer paid you under SEF 44.

    But the "limits agreement", which meant that you could not sue the at-fault driver, also extends to your insurer. That means your insurer would not be able to recover any funds they paid to you and that made them mad! They tried to argue in court that since they couldn't recover from the at-fault driver, then you weren't entitled to any further compensation under SEF 44. But the courts (eventually) said, "Sorry, but the injured party's insurer has to pay because SEF 44 was indeed in effect at the time of the accident." So SEF 44 and the "limits agreement" are 2 separate things and don't affect each other.

  • jptardif2jptardif2

    Hi Graham,

    Went and looked back at this case this morning. Is it just me or that ruling is giving an opportunity for insureds to remove the insurers subrogation rights? I don't know how I feel about that ruling. Thoughts?

    Thanks,

  • grahamgraham

    Well, yes, the insurance company does have a point. I found a pretty good explanation of that case below if you care to read it:

    I can understand why the insurance company was upset about the ruling, but when you look at the details of the case and policy, as well as the power imbalance between the insurance company versus the injured parties and the under-insured motorist, things get murky.

    It was determined that the injured parties and the under-insured motorist entered into the limits agreement in good faith. And yes, the insurance company lost their subrogation rights when they didn't do anything wrong, but I think in this particular case the relatively small loss suffered by the insurance company was less important than the well-being of the parties involved in the accident.

  • chrisboersmachrisboersma

    intuition says its wrong, but policy wordings say ok

    In these cases it's important to consider the policy wordings and contractual rights. Subrogation is merely a legal agreement to transfer recovery rights from one party (injured) to another (insurance company).

    The policy wordings define the contract between the injured party and insurance company.

    indemnify each eligible claimant for the amount that such eligible claimant is legally entitled to recover from an inadequately insured motorist as compensatory damages in respect of bodily injury or death sustained by an insured person by accident arising out of the use or operation of an automobile

    BC Wording:

    a means an owner or operator of a vehicle who is legally liable for the injury or death of an insured but is unable... to pay the full amount of damages recoverable by the insured or his personal representative in respect of the injury or death.

    It's unclear why each province doesn't use the same terminology here.

    There is never a agreement between insurance company and at-fault party (actions of the at-fault party cannot change agreement between insured and insurance company).

    If the injured party waives subrogation (or signs limits agreement) the insurance company can only apply rules that it pre-agreed to in the contract (or statutory conditions). It cannot make up random rules after the fact, because it didn't like the insured choices. As a result, no terms or conditions prevented the insured from signing an agreement that prevented subrogation. So insured is entitled to benefits as long as coverage agreement applies. In this case the coverage agreement does apply. A normal (eg. property policy) would have a exclusion for situations where an insured prejudices the insurance company.

    Underinsured/underinsured coverage is deliberately broad and doesn't have the same statutory conditions as say normal coverage. As a result strange results like these are common. One has to look at the agreement to see if some rule can apply. If no rule applies you cannot deny coverage

  • bkmlocksbkmlocks

    Hello @graham,

    As per your discussion with @jptardif2 above, it does seem that by signing the limit agreement, the insurer lost its subrogation rights.

    However in Spring 2017 Q4(c), sample answer seems to indicate that subrogation rights were NOT affected.

    I quote from the examiner's report sample answer:

    " The insurer would have to pay because the limit agreement did not:
    1) prevent insured from being fully compensated for entitlement at the accident.
    2) Insurer’s right of subrogation after insured is fully compensated."

    Can you please maybe clarify a bit?

    Thank you!

  • grahamgraham

    The second sample answer you quoted from the examiner's report is not a very good answer. I'm not even sure that point (2) is saying that that subrogation rights were not affected because there seems to be a word (or words) missing. In any case, I would ignore it because the first sample answer is much clearer. So sorry, I'm not much help here.

  • bkmlocksbkmlocks

    Thank you for clarifying @graham! Definitely ignoring point 2 as it seems to even have words missing like you pointed out :neutral:

  • wilsonchan18wilsonchan18

    @graham
    Hi May I know, for this cause what is "Motion judge rule", I saw this word from the battlequiz, but cannot understand even I tried google it.

    Thanks and Cheers,
    Wilson

  • grahamgraham

    It's just the judge that made the original ruling on the motion, and:

    • A motion is a process for requesting that a judge make an order.

    All you need to know here is that the judge sided with the insurer in the original ruling.

  • wilsonchan18wilsonchan18

    Okay, thank you Graham! :)

  • AndrewLAndrewL

    Hello @graham,

    My apologies for bugging you out on this question, but the following article https://canliiconnects.org/en/summaries/33714, seems to contradict what you said above regarding the subrogation rights of the Insurer.

    Is there any difference between the two arguments?

  • Staff-T1Staff-T1

    Conclusion seems similar to me

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