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Underinsurance Coverage

Underinsurance Coverage

This recent Ontario Court of Appeal case, Kahlon v. ACE INA Insurance, deals with underinsurance coverage.

What is underinsurance coverage?  Underinsurance coverage is contained in an automobile insurance policy as additional insurance.  Known as the OPCF 44R endorsement, it can only be purchased by a policyholder as additional coverage to the coverage provided by the standard automobile policy. The OPCF 44R endorsement is optional and a person who chooses to purchase the coverage provided by the OPCF 44R endorsement pays an additional premium.

In simple terms, OPCF 44R provides insurance against underinsurance. It is meant to put an eligible claimant in the same position they would have been in had a liable underinsured motorist carried automobile insurance in the same amount as their OPCF 44R policy.

Kahlon v. ACE INA Insurance deals with an underinsured coverage claim and which insurer, if any, was obliged to provide underinsurance coverage to the insured.

Here are the facts:

Mr. Kahlon’s corporation, Kohuja Transport Inc., owned and leased a tractor to Bell City Transport Systems Incorporated. Mr. Kahlon operated it as an independent contractor for Bell City Transport under fleet insurance provided by ACE INA Insurance.

On May 24, 2011, Mr. Kahlon was in Florida operating the tractor with a trailer. He stepped out of the tractor when it was stopped in a line-up to determine the cause of the delay. He was struck by a Florida-based domestic vehicle operated by a member of the MacDonald family. Mr. Kahlon suffered serious injuries, including a traumatic brain injury. The insurance coverage available on the MacDonald vehicle was only $20,000, which was insufficient to cover the damages flowing from Mr. Kahlon’s injuries. The motion judge identified this as an obvious situation of “underinsurance”.

Mr. Kahlon had automobile insurance on his personal vehicle through Allstate Insurance Company of Canada. Both the Allstate policy and the ACE INA fleet policy had OPCF 44R Family Protection Coverage, which covers underinsurance.

The motion judge granted summary judgment to Mr. Kahlon and declared that Allstate was obliged to respond to his underinsured coverage claim and ACE INA was not obliged to respond.  Allstate appealed.

The Court of Appeal in this case, expressed concerns about the appeal as presented, and decided to adjourn the hearing of the appeal, after hearing submissions.

In making their decision to adjourn the Appeal, the Court of Appeal stated the following:

The parties are entitled to have their appeal decided; at the same time, however, courts are obliged to understand and take into account the context within which contractual interpretation will operate. The court has limited evidence before it about how Ontario-based truck drivers and other drivers of commercial vehicles obtain underinsured coverage, if in fact they do, and whether the interpretation urged by Allstate would have a surprising impact on Ontario insureds.

We will keep you posted when this case returns back before the Court of Appeal.  Again, the decision could have impact on insurance for truck drivers in Ontario and therefore, the Court of Appeal wants to ensure it has all of the information and evidence before it, in making its decision.

Just heard about Pallett Valo being chosen as One of Ontario's Top Three Regional Firms. Congratulations – well deserved.
Peter Campbell, BDO Canada LLP