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No requirement for policyholder to sue insured, potentially liable third parties before resorting to uninsured coverage


January 29, 2010   by Canadian Underwriter


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An insurance company has been found liable to pay a policyholder injured in an auto collision under the uninsured provisions of the policy, even though the policyholder failed to sue potentially negligent and/or liable insured third parties.
The Supreme Court of Canada did not grant leave to appeal in Loftus v. Security National Insurance Company, marking the end of the road in the insurer’s appeal against the findings of the Ontario Court of Appeal.
Elizabeth Loftus was injured in an accident in 2001 while stopped at a red light.
Christian Robertson, who was driving an uninsured vehicle, collided with Loftus’s car after a high-speed chase with police.
Loftus sued her own insurer, Security National, under the uninsured provisions of her policy. According to her policy (the wording of which follows s. 265 of the Insurance Act), Security National agreed to provide for all payments Loftus would legally be entitled to recover from the uninsured Robertson, subject to prescribed limits and exclusions.
Security National, meanwhile, brought a third-party proceeding against the police chief, the police services board and the municipality, alleging they were negligent in the pursuit and apprehension of Robertson.
The third parties above — the courts refer to them as “joint tortfeasors” — were insured under a commercial general liability policy for any bodily injury damages that may have been awarded against them.
Security National noted that if Loftus had named the police and the municipality in her lawsuit — she did not, and was in fact statute-barred from doing so because she had exceeded the limitation period to add them — she would have been able to recover money under the third parties’ insurance policy.
But the Ontario Court of Appeal nevertheless ruled that Security National owed Loftus payments under the uninsured portion of her policy.
“In our view, on a proper reading of these provisions, there is no requirement that an injured insured sue insured potential joint tortfeasor(s) in order to resort to the uninsured coverage,” the court ruled. 
The court further noted that the police had not actually admitted to any negligence or liability. The third parties had only consented to a hypothetical question being presented to the court “assuming” they were negligent for the purpose of determining the narrower legal issue raised by Loftus.