When a lawyer takes on a personal injury file, it is paramount to evaluate the SEF 44 Family Protection Endorsement for (1) coverage, and (2) potential liability.
This is essential in order to preserve your client’s rights from the insurer-friendly 12-month limitation period.
Coverage
As many of you know, the SEF 44 is an optional rider to the Standard Automobile Insurance Policy in your province or territory. With that said, it is routinely sold by insurers alongside the standard policy coverage.
The SEF 44 provides extra protection in the event that your client’s claim exceeds the Section A policy limits of the tortfeasor. Liability to your client’s own SEF 44 insurer exists only where your client’s own limits exceeds the Section A limits of the tortfeasor.
For example, if the tortfeasor’s limits are $500,000.00, and your client’s are $1,000,000.00, your client’s SEF 44 insurer is exposed up to $500,000.00.
Liability
It cannot be emphasized enough that the SEF 44 Endorsement language comes with a contractual limitation period of one year:
Every action or proceeding against the Insurer for recovery under this endorsement shall be commenced within 12 months from the date upon which the eligible claimant or his legal representatives knew or ought to have known that the quantum of the claims with respect to an insured person exceeded the minimum limits for motor vehicle liability insurance in the jurisdiction in which the accident occurred. No action which is commenced within 2 years of the date of the accident shall be barred by this provision.
Importantly, this language references not that you know or ought to know that your client’s claim will exceed the actual limits of the tortfeasor’s Section A, but will exceed the minimum statutory third-party liability limits in your province or territory.
For New Brunswick and Prince Edward Island, this is only $200,000.00 (Insurance Act, RSNB 1973, c I-12, s 243(1); Insurance Act, RSPEI 1988, c I-4, s 234(1)).
For Nova Scotia, this is only $500,000.00 (Insurance Act, RSNS 1989, c 231, s 125(1)).
Insurance defence lawyers will routinely cite the apparently strict contractual language to avoid paying out, and for that reason, it is essential to evaluate your client’s claim against these statutory limits on an ongoing basis.
What to do if you get caught on the SEF 44 limitation period
Courts across the country have developed two competing interpretations of the limitation period: the Ontario approach and Alberta approach.
If you find yourself in Nova Scotia, courts have adopted the Ontario approach.
If you find yourself in New Brunswick or Prince Edward Island, courts have not yet weighed in, and so it is important to understand both and generate arguments for each.
The Alberta approach
If you are in New Brunswick or Prince Edward Island, you want to argue that the clock on the SEF 44 does not run until the underlying tort claim is decided or settled.
The case law which established the Alberta courts’ approach to the SEF 44 limitation is Wawanesa v Shoemaker [1994] A.J. No. 126.
In Shoemaker, supra, the Court found that the language “quantum of claims” was ambiguous as to whether it means the numbers as they appear on the prayer for relief, counsel’s opinion at some point in the future as the case progresses, or quantum as determined on judgement day or settlement day.
Consequently, the Court invoked the use of the contra proferentum doctrine to construe the language against the party who proferred the contract, the insurer.
As a result, the 12-month limitation period runs only from judgment or settlement day of the underlying tort action.
The decision was held up on appeal by the Alberta Court of Appeal, and has since been followed for nearly 30 years (Mellon (Next Friend of) v. Gore Mutual Insurance Co., 1995 ABCA 340; Shaver v Co-operators General Insurance Co, 2011 ABCA 367.)
The Ontario approach (adopted in Nova Scotia)
If you are in Nova Scotia, courts have adopted the Ontario approach, and the SEF 44 clock starts to run on the discoverability of the underlying tort claim exceeded the statutory minimum in your province or territory.
In Oliver v Elite Insurance Co, 2014 NSSC 413, the Nova Scotia Supreme Court followed the Ontario Court of Appeal’s decision in Roque v Pilot Insurance Co, 2012 ONCA 311.
In Roque, the Court adopted the reasoning from McCook v Subramaniam, [2000] OJ No 4583, which departed from the Ontario Court of Appeal’s previous approach on interpreting the SEF 44 limitaiton period (Caruso v Guarantee Co of North America, [1996] OJ No 4072).
In McCook, the Court stated:
The plaintiff's case runs from when he has a body of evidence accumulated that would give him a "reasonable chance" of persuading a judge that his claims would exceed $200,000. The plaintiff should be given a "degree of latitude... in making this very individual and complicated determination" but "that is not to say that the plaintiff is entitled to wait until he... has an overwhelming case".
However, like the Alberta approach, the Nova Scotia Supreme Court in Oliver acknowledged that central issue that is familiar to plaintiff’s lawyers that the estimated quantum of a case will swing dramatically over the course of a file.
As a result, the Court remedies the issue of uncertainty of quantum by affording a “healthy latitude” to plaintiff counsel.
In fact, on the facts of Oliver, the Court found only that plaintiff’s counsel ought to have known that the claim exceeded the insurance limits only when they prepared their mediation brief for a June 23, 2008 mediation for the underlying tort action. The motor vehicle accident had occurred on October 12, 2001.
It appears then, that this “healthy latitude”, provides quite a bit of leeway in order to respond to the disadvantages of the Ontario case law.
TLDR:
Even though the SEF 44 is considered excess insurance, because the contractual limitation period references lower-than-unusual statutory insurance minimums, lawyers should evaluate the SEF 44 for every file they take on, including non-catastrophic claims.