Physical contact with unidentified vehicle required for coverage under SEF No. 44 Endorsement in Alberta

Insurance law – Automobile insurance – Unidentified motorist – Interpretation of policy – Appeals

Funk v Wawanesa Mutual Insurance Co., [2018] A.J. No. 669, 2018 ABCA 200, Alberta Court of Appeal, May 25, 2018, R.L Berger, F.F. Slatter and P.A. Rowbotham JJ.A.

The Alberta Court of Appeal considered whether the SEF No. 44 Endorsement on a policy of automobile insurance entitled the insured to indemnity for damages he suffered in an automobile accident.

The insured purchased the Family Protection Endorsement SEF No. 44 as additional coverage from his insurer. In his pleading, he alleged he was operating his motor vehicle in a lawful manner, at night, driving on his side of the road when he had to swerve to the right to avoid an impact with an oncoming vehicle. His vehicle rolled over in the ditch causing him injuries.

The SEF No. 44 Endorsement provides coverage when the policyholder is involved in an accident with an inadequately insured motorist, which includes an unidentified automobile. The claim arose because the insurer argued that the policy requires “physical evidence indicating the involvement of an unidentified automobile”, and “physical contact of such automobile with the automobile of which the insured person is an occupant”.

The chambers judge concluded there was no coverage on the face of the SEF No. 44 Endorsement, because on a proper interpretation the policy requires physical contact with the unidentified vehicle. The chambers judge nevertheless held that the insured was entitled to indemnity for his injuries because the requirement of physical contact in the policy would have required the insured to commit a tort which was contrary to public policy.

The Court of Appeal allowed the appeal holding that the approach of stepping around the terms of an insurance policy on the basis of unjust or unreasonable terms, public policy, or relief from forfeiture “runs the risk of throwing any semblance of certainty out the window”. The court recognized the danger that the wording of insurance policies could become meaningless, that they would come down to providing the kind of coverage that some future court found to be fair, even though the insured never contracted for that coverage and the insurer never priced the risk accordingly. The court held that given the definition specifically requires “physical contact” it could not have been in the reasonable contemplation of either party that physical contact was not required.

This case was digested by Cameron B. Elder, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Cameron B. Elder at celder@harpergrey.com.

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