Appeal court overturns controversial ruling on auto coverage arising from overseas accident

A controversial 2019 court ruling — in which the Alberta Court of Queen’s Bench found that a client struck by a motorcycle in the Philippines is covered by Alberta’s family protection endorsement — has been reversed on appeal.

“The SEF 44 Endorsement is not travellers’ insurance,” Alberta Court of Appeal Justice Frederica Schutz wrote in in Wage v. Canadian Direct Insurance, a unanimous ruling released Feb. 4. This overturns an earlier ruling against CDI  by Court of Queen’s Bench Justice Avril Inglis.

The SEF 44 (family protection) endorsement covers an Alberta auto client for what they could recover from an inadequately insured motorist for bodily injury.

Leizle Wage died after being hit by a motorcycle in the Philippines. Her spouse and estate made a claim under both accident benefits and her family protection endorsement with CDI, which denied the claim on the grounds that it is only valid in Canada and the United States.

Alberta’s SPF No. 1 auto policy states the following under territory: “The policy applies only while the automobile is being operated, used, stored or parked within Canada, the United States of America or upon a vessel plying between ports of those countries.”

The family protection endorsement says it “does not apply to an accident occurring in the Province of Quebec for which compensation is payable under the Automobile Insurance Act of Quebec or by virtue of an agreement referred to in the Act.”

Originally in 2018, Master Scott Schlosser of the Court of Queen’s Bench said both accident benefits and the family protection endorsement apply in Wage’s case. Though she disagreed with some of Schlosser’s conclusions, Justice Inglis ultimately ruled that Schlosser’s ruling had the correct result. Inglis reasoned that the territorial limit in the standard auto policy applies to where the client’s insured vehicle is located. In Wage’s case, her vehicle was in Alberta while she went to the Philippines.

But appellate court justice Schutz countered that the family protection endorsement contains its own definition of automobile, which is “a vehicle with respect to which motor vehicle liability insurance would be required if it were subject to the law of the province governing the policy.” That definition describes the motorcycle that struck and killed Wage, and the vehicle at issue under the SEF 44 Endorsement, she wrote.

So the territorial limitation in the base auto policy also applies to the family protection endorsement.

The Insurance Bureau of Canada, which had intervenor status in Wage, argued that the typical premium for family protection is about $20 and this supports the interpretation that coverage does not apply worldwide. The appeal court agreed.

“Moreover, the suggestion that the SEF 44 Endorsement provides greater territorial coverage than the underlying policy does not comport with commercial reality,” Justice Schutz wrote. “It is inconsistent with the reasonable expectations of the insurer and insured, and a contrary interpretation is unrealistic.”