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The Division of Policy Limits is a Zero Sum Game in Car Accident Cases (Ontario)

If you’ve sustained serious and permanent injuries in car accident, you recover damages against the at fault driver.

Standard policy limits in Ontario sit at $1,000,000. Ontarians can purchase optional benefits to increase their coverage, but only few ever pick up that option (mostly personal injury lawyers, insurance adjusters, insurance brokers and insurance defence lawyers…notice a trend…mostly people in the know).

In some cases, those policy limits are greater than $1,000,000. Often commercial carriers have policy limits of $5,000,000 or greater. Sometimes your car insurance combines with your home insurance creating what’s called an umbrella policy or umbrella coverage, thereby increasing the policy limits from $1,000,000 to $2,000,000 in coverage.

It’s a good thing for an injured accident victim when there are greater policy limits. It means that the injured party will realistically be able to recover more damages in their personal injury case, if they are entitled to those damages at law.

To understand this concept of recovery, let’s examine what happens when policy limits are inadequate to satisfy a claim.

Let’s say that the claim is worth $1,500,000, but there are is only a $1,000,000 limit under the policy. The first $1,000,000 will be covered by the insurance company pursuant to the insurance policy. This leaves a shortfall for the claim of $500,000.

It will be Defendant’s personal responsibility to cover this $500,000 shortfall in the event they don’t have a policy which will cover the excess amount owing. This $500,000 is not insurable under the standard car insurance policy. The Plaintiff can secure a judgment against the Defendant personally and seize or lien his/her assets; or even garnish his/her wages until the Judgment is satisfied. Please note that Ontario Works payments are NOT subject to garnishment. What is however subject to garnishment are regular pay cheques/wages.

More often than not, Defendants are judgment proof. Or they will make themselves judgment proof after the fact. They will divest themselves from all of their seizable and tangible assets. There are expressions which ring true in these scenarios:

  1. You always want to sue a party with big pockets.
  2. You can’t get blood from a stone

This is why recovering under those policy limits is so crucial to Plaintiffs. More often than not, the money under the insurance policy is the only real money that the injured Plaintiff will have access to.

Competition over Policy Limits is a Zero Sum Game

Multiple Plaintiffs may have to compete against each other to determine who gets what quantum of money under the policy. Often judicial intervention with respect to who gets what sum of money is required. A Judge will be asked to make a determination over the division of policy limits.

In very simple terms, think of the amount of money available under the policy as a pizza; or perhaps a nice chocolate cake.

You cannot bake another pizza or chocolate cake. There is only one. That pizza or chocolate cake needs to be divided between the Plaintiffs. The division will be proportional to the Plaintiff’s injuries, losses and damages. The most injured Plaintiff will get the most. The least injured Plaintiff will get the least. What one Plaintiff gets, the other Plaintiff does not get; which makes it a zero sum game.

If there are three different Plaintiffs, and the parties agree that damages should be divided 60% for Plaintiff A;, 30% for Plaintiff B and 10% for Plaintiff C, damages will be awarded as follows under a standard $1,000,000 car insurance policy:

Plaintiff A $600,000 (60%)

Plaintiff B $300,000 (30%)

Plaintiff C $100,000 (10%)

Total $1,000,000 (100%)

Any sums outside of the amounts stated above need to be claimed outside of the policy. Those sums which are above and beyond the policy limits likely won’t be recoverable by the Plaintiffs; save in circumstances where the Defendant has tangible assets (think of a wealthy Defendant).

The Waiting Gamelinkedin-2-300x300

In many personal injury cases there is more than one Plaintiff, or more than one injured party for a single accident claim. At the same time, there may only be one at fault Defendant who has to pay out for the Plaintiffs’ damages.

What happens in those cases where there is only one pool of money from which to recover?

In some of those cases, one Plaintiff may be able to agree in principal to a settlement. But the Defendant insurer won’t enter in to a formal settlement on account of the policy limits issue. The Defendant insurer cannot expose his/her insured to personal liability should the totality of the claims exceed the policy limits.

This means that if one Plaintiff can strike a deal with the Defendant, but the other two Plaintiffs cannot, that one Plaintiff is left waiting until the other two Plaintiffs are able to resolve their claims. Alternatively, the parties can all march expeditiously to trial. But a smart Defendant will bring a motion to have all of the claims tried together so that the claims are in lock step with one another. That means a delay in one case spells delay in the other two cases.

In this situations, it’s advantageous to a Plaintiff to push for all of the actions to be case managed by a Master or a Judge. This provides a oversight system for the cases by the Court to ensure that they operate on a proper timeline. Lawyers can seek appointments before the Case Management Judge or Master to get things done or call out other parties for their delays. Non Contentious Motions can also be heard with little delay before the Case Management Judge or Master.

Ultimately, a Plaintiff will either need to get their case moved as quickly as possible to trial or be patient for the other cases to catch up to the pace of their own claim. This can be very frustrating for the Plaintiff and personal injury lawyer alike. The trial situation is even more frustrating given that civil courts were backlogged before the COVID pandemic, and have been rendered even more backlogged during the pandemic itself. Getting things through the Courts at all levels has been slower than it has ever been on account of the Pandemic. Even using electronic filings and Zoom hearings is not a solution towards managing the incredible backlog of civil cases which our Courts have to deal with in Ontario.

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