The driver of the vehicle was insured, but his coverage was insufficient to cover the damages
In a recent ruling, the Ontario Court of Appeal clarified the entitlement to coverage under excess liability endorsements in an insurance policy.
The dispute in Smith v. Taylor, 2024 ONCA 223 stemmed from a tragic incident in 2017, where Ken Schlimme sustained fatal injuries after his motorcycle was hit by a car that failed to adhere to a stop sign. The driver of the vehicle, Robert Taylor, was insured, but his coverage was insufficient to cover the damages claimed by Kerry Smith, Schlimme's common-law spouse.
Smith, insured by Aviva Canada Inc., sought to claim damages under her automobile policy and a “Personal Excess Liability Policy” endorsement included in her comprehensive homeowners insurance policy. Aviva, however, denied coverage under the excess endorsement, prompting Smith to appeal the initial dismissal of her claim against the insurer.
The appeal court noted that in interpreting the excess endorsement, the court must consider the interplay between it and the insured’s automobile insurance policy, which includes the standard optional family protection coverage. The court must also determine whether the insured must exhaust the optional family protection coverage in her automobile policy before she can recourse to the excess endorsement coverage.
The Court of Appeal found in favour of Smith, correcting the motion judge’s interpretation of the excess endorsement. The court's analysis highlighted that the motion judge improperly applied the definition of “inadequately insured motorist” from the automobile policy to the excess endorsement. According to the appeal court, the judge’s decision conflicted with the purpose of providing additional coverage beyond the automobile policy limits.
The appeal turned on the interpretation of insurance documents and the proper application of policy endorsements, specifically the interaction between a personal automobile insurance policy and a personal excess liability endorsement. The court concluded that Smith does not need to exhaust her automobile policy's coverage before accessing the excess endorsement coverage, effectively allowing her to seek additional compensation for
Ultimately, the appeal court set aside the previous order dismissing the action against Aviva and allowed Smith to proceed with her claim for damages under the excess endorsement.
