Canadian Underwriter

How family protection endorsement works when multiple tortfeasors liable

December 16, 2020   by Greg Meckbach

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A Court of Appeal for Ontario ruling that reduced an Ontario auto insurer’s liability by more than $500,000 is now final.

The Supreme Court of Canada announced Dec. 10 it will not hear an appeal from Gregory Tuffnail, who was seriously injured in a collision in September 2009. At the time, Tuffnail’s insurer was State Farm Mutual Automobile Insurance Company.

The key issue in Gregory Alan Tuffnail, et al. v. State Farm Mutual Automobile Insurance Company, et al., is what happens in Ontario when an accident victim sues an at-fault driver who is under-insured, does not sue the bartender who served alcohol to the at-fault driver, and the plaintiff also claims under their family protection endorsement.

In other words, could the bartender be held jointly liable to the plaintiff when the plaintiff did not actually sue the bartender? As it stands, the answer to that question is yes.

In the original decision at trial level, the answer was no. At trial In 2017, Justice Helen Rady of the Ontario Superior Court of Justice ruled that State Farm must pay Tuffnail $800,000, under Tuffnail’s OFCF 44R endorsement on Tuffnail’s own auto policy. (Desjardins Group has since acquired State Farm’s Canadian operations).

Complicating matters was that the driver sued by Tuffnail was found to have consumed alcohol before the accident at a wedding reception. Tuffnail sued the groom of that wedding but not the bartender. Meanwhile, the groom and State Farm sought contribution and indemnity from that bartender.

One of Justice Rady’s findings against State Farm (i.e. that the bartender’s liability insurance is not “available” to the accident victim, who did not sue the bartender) was overturned on appeal.

State Farm now owes Tuffnail only $347,000 under his family protection endorsement. Tuffnail’s application for leave to appeal to the Supreme Court of Canada is now dismissed. The top court does not normally issue reasons on why it dismisses leave applications.

The family protection endorsement is an optional first-party auto insurance that protects claimants who are suing under-insured drivers. So the family protection endorsement is excess insurance. Essentially, the dispute in Tuffnail was over exactly what the family protection coverage is in excess to.

The policy wording says coverage is excess to amounts that are “available” from “the insurers of a person jointly liable with the inadequately insured motorist for the damages sustained by an insured person.”

One source of disagreement was over whether the bartender could be considered jointly liable with the driver if the bartender was not named by the plaintiff in the lawsuit.

The tragedy leading to the case began with a wedding reception in September 2009 at a community centre about half-way between London and Kitchener. Tuffnail was a guest at that reception, along with Steven Meekes and Kristopher Petrie. After the reception, Tuffnail and Petrie were passengers in a vehicle driven by Meekes. Petrie was killed in the collision.

Meekes was sued both by Tuffnail and by Petrie’s family.

A jury awarded Tuffnail about $3.5 million. Liability was apportioned 65% to the driver, 20% to the groom’s estate and Tuffnail was found 3.85% contributorily negligent. The bartender was found 11% liable.

But the bartender was not actually named as a defendant by Tuffnail.

Tuffnail had made a claim with State Farm under his $1-million family protection endorsement because the driver only had $200,000 available in insurance coverage. The driver would have needed at least $2.2 million in insurance coverage to cover the cost of the judgement.

Of the trial award, Tuffnail got about $1.898 million from the groom’s estate (whose insurance limit was $2 million) and $189,780 from the at-fault driver. About 5% of the defendants’ insurance proceeds were awarded to the heirs of the other passenger.

One of Tuffnail’s lawyers, Siskinds LLP partner Jim Virtue, was interviewed by Canadian Underwriter after Tuffnail applied for leave to appeal to the Supreme Court of Canada.

At trial, Tuffnail’s counsel argued the bartender cannot be jointly liable to Tuffnail because Tufnail did not sue the bartender, Virtue told Canadian Underwriter. So the money under the bartender’s liability insurance cannot be available to the plaintiff, Virtue told Canadian Underwriter in explaining Tuffnail’s position at trial.

Tuffnail had $1 million in coverage under the State Farm family protection endorsement. So subtracting the at-fault driver’s liability coverage limit of $200,000, the trial judge reasoned State Farm should owe Tuffnail $800,000.

But in 2020, the Court of Appeal for Ontario ruled State Farm can deduct $3.2 million (the combined total insurance limits of the driver, the groom who hosted the reception and bartender) from the original court award, in calculating what State Farm has to pay Tuffnail on his family protection endorsement. Since the jury found that the bartender is jointly liable, this makes the bartender’s insurance available to Tuffnail, the Court of Appeal for Ontario reasoned.

Both State Farm and the groom’s estate sued the bartender, seeking contribution and indemnity for the money they had to pay Tuffnail.

The Court of Appeal for Ontario found that State Farm’s lawsuit against the bartender is in substance a subrogated claim in Tuffnail’s name.

The problem for the plaintiff is, “that doesn’t get Tuffnail the money. That’s just a legal construct,” Virtue said of the appeal court’s suggestion that State Farm’s third-party claim against the bartender was really a subrogated claim in Tuffnail’s name.


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