Most automobile insurance policies contain a Family Protection endorsement which essentially ensures that anyone covered by the auto policy will not be denied recovery in the event that they become injured by an unidentified, uninsured, or underinsured owner/operator of another motor vehicle. In these situations, the Family Protection coverage would provide indemnity up to the limits purchased.
Not as common, however, is to have Family Protection Coverage under a Homeowner’s Excess Insurance Policy. This recent appellate decision delves into this coverage, and the Ontario Court of Appeal made it very clear that this coverage operates quite differently than the Family Protection Endorsement under the auto policy.
This case was dealing with a situation where the at-fault owner/operator had $1M of third-party liability insurance coverage, and the injured plaintiff had access to Family Protection coverage under both an automobile policy and a separate homeowner’s policy: both with $1M of coverage.
The Plaintiff had to concede that the $1M automobile Family Protection endorsement was not triggered in this case, because the at-fault owner/operator had the same level of insurance coverage ($1M): hence the at-fault driver was not “underinsured” (or uninsured or unidentified).
The sole issue was whether the Family Protection Coverage in the homeowner’s policy operated the same way: the lower court believed it did, and concluded that there was no coverage under the homeowner policy because there was no instance of underinsurance when comparing the amount of insurance carried by the at-fault party ($1M) and the monetary limit of the homeowner’s Family Protection coverage ($1M). The lower court also held that the homeowner’s policy would only become triggered once the automobile Family Protection coverage was exhausted, and since that coverage was not triggered, it prevented the homeowner’s Family Protection coverage from being triggered.
The Ontario Court of Appeal disagreed with the entirety of the judge’s reasoning, and the appeal was allowed, thereby providing the injured plaintiff with access to the extra $1M under the homeowner Family Protection Coverage.
Although there is a lengthy critique of the various rulings and interpretations made by the lower court judge, the most important takeaway is that the test for “inadequately insured” is fundamentally different between the two policies, as follows:
- Automobile Family Protection Endorsement: “inadequately insured” occurs when the third-party liability limits on the at-fault vehicle is less than the policy limits of the automobile Family Protection Endorsement. In this case, with both polices having $1M limits, there was no occasion of an inadequately insured motorist.
- Homeowners Excess Family Protection Coverage: “inadequately insured” occurs when the third-party liability limits on the at-fault vehicle is less than injured party’s damages. In this case, the injured party claimed, in “her statement of claim, …. damages of $3.5 million… (and after seeking to)… recover $1 million in damages pursuant to … (the at-fault party’s insurance policy)…, If successful, a shortfall of $2.5 million of the claimed damages remains… (thereby making the at-fault party)… an inadequately insured motorist because his insurance is not sufficient to pay the damages that… (the injured party)… may be entitled to recover from him.” (from paragraph 48)
It is noteworthy that the determination is done based on the amounts that were pleaded in the Statement of Claim, and not on any amount that was adjudged or awarded.
The appellate court reasoned, amongst other things, that if “inadequately insured” is defined the same way in both policies, as the judge did, the homeowner’s Family Protection coverage would simply mimic the same coverage available under the automobile policy, with the result that the homeowner coverage would rarely, if ever, be triggered, which undermines the purpose of the excess endorsement which was to provide the insured person with coverage in excess of that provided by the automobile Family Protection Endorsement.
Smith v. Taylor, 2024 ONCA 223
https://www.canlii.org/en/on/onca/doc/2024/2024onca223/2024onca223.html