Additional insurance purchased in Canada may not provide coverage to insureds injured abroad

The Insurer appealed a ruling of a motion judge. The motion judge held that a territorial limitation contained in a motor vehicle policy did not apply to the underinsured motorist endorsement and that an insured was entitled to $1,000,000 of insurance coverage as a result of damages suffered in a motor vehicle accident in Jamaica.  The Court of Appeal found that the motions judge erred in her interpretation of the contract, and allowed the appeal, on the basis that the territorial limitation contained in the policy excluded coverage to the insured.

Pilot Insurance Co. v. Sutherland, [2007] O.J. No. 2596, Ontario Court of Appeal, M. Rosenberg, E.E. Gillese and S.E. Lang JJ.A., July 3, 2007

The Insureds were involved in a motor vehicle accident in Jamaica which left one of them with quadriplegia. The potential at-fault parties had insurance coverage limited to about CDN$18,400. The Insureds had purchased an optional endorsement under the policy which provided additional coverage equal to what they would have received if the inadequately insured motorist at fault for the accident had $1,000,000 of coverage.

The issue was whether the territorial limitation contained in the policy and in the Insurance Act, R.S.O. 1990, c. I.8, applied. The territorial limitation contained in the policy provided coverage for incidents occurring in Canada, the United States of America, and any other jurisdiction designated in the Statutory Accident Benefits Schedule. The endorsement did not contain a specific territorial limitation, but s. 22 of the endorsement stated that “except as otherwise provided” the limits, terms, conditions, provisions, definitions and exclusions of the Policy applied.

The Court of Appeal held that the motions judge erred in her interpretation of the policy. The Court of Appeal held that on a plain reading, s. 22 incorporated the territorial limitation. The Court of Appeal also found that the Insurance Act was silent on the issue of whether underinsured coverage could include a territorial limitation, and that the limitation on the coverage provided by the endorsement was therefore permissible.

This case was originally summarized by Sarah Swan and originally edited by David W. Pilley.

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