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Insurance - Auto - Indemnification Between Insurers. Hesch v. Langford [first loss insurance]
In Hesch v. Langford (Ont CA, 2025) the Ontario Court of Appeal allowed an appeal, here where the sole issue was the "interpretation of s. 1.6(a)(ii) of the 44R ['OPCF 44R Family Protection Coverage' endorsement] by finding that [the victim] was not an “insured person”."
Here the court considers issues of 'first loss insurance':The Coverage Priorities
[36] Kent argues that Ashley’s OAP-1 policy is first loss insurance pursuant to s. 277 of the Insurance Act, R.S.O. 2000, c. I.8, which provides that “a valid owner’s policy” is first loss insurance and “any other valid motor vehicle liability policy is excess insurance only.” They submit that since Ashley’s Pafco policy is a valid owner’s policy coverage under s. 277, Joe’s 44R is not required.
[37] It is true, as Pafco now recognizes, that pursuant to s. 277 Ashley’s OAP-1 policy is first loss insurance for the $200,000 in uninsured motorist coverage that it carries. However, the Insurance Act does not provide underinsured motorist coverage, and therefore it does not apply to coverage under an optional 44R endorsement: Pilot Insurance Company v. Sutherland, 2007 ONCA 492, 86 O.R. (3d) 789, at paras. 32-36. As Sharpe J.A. noted in Benson v. Walt, 2018 ONCA 172, 141 O.R. (3d) 220, at para. 13: “Subsection 277(1) deals with the priorities as between primary motor vehicle insurance policies and its reach does not extend to any and every type of policy that might have to respond once the policy limits of applicable motor vehicle policies are exhausted” (emphasis added). Where there is a priority dispute between two 44Rs, a court must therefore look to their provisions, not to s. 277.
[38] In the alternative, Kent argues pursuant to s. 7(i) of the 44R that any coverage from its 44R is excess coverage and therefore there is nothing for it to contribute. Section 7(i) of the 44R provides that “the amount payable … to an eligible claimant” under 44R endorsement is “excess to amounts of another motor vehicle liability policy”. This submission is also incorrect. By its terms, s.7 addresses the amount of insurance available to an eligible claimant, not the amount of… Kent argues that pursuant to s. 7(i), since Ashley’s motor vehicle policy included coverage for $1,000,000, any coverage from its 44R is excess coverage, therefore there is nothing for it to contribute. This submission is also incorrect. Section 7 addresses the amount of insurance available to an eligible claimant, not the amount of insurance provided by the policy as a whole: see Keelty v. Bernique (2002), 2002 CanLII 22040 (ON CA), 57 O.R. (3d) 803 (C.A.), at para. 23. Ashley’s OAP-1 provided only $200,000 in coverage that was legally available to the plaintiffs, through its uninsured motorist coverage. The two 44Rs must therefore be looked to for the excess over the $200,000 that Pafco must pay eligible claimants under the primary policy, in this case $750,000. The share of that $750,000 excess insurance that each eligible claimant can look to under the 44R endorsements is the amount of the damages that they are each entitled to that exceed their proportionate share of the $200,000 uninsured motorist coverage provided by Ashley’s OAP-1: see McGrath v. Arshad (2008), 79 M.V.R. (5th) 158 (Ont. S.C.).
[39] For the reasons I have provided, Joe is an eligible claimant under both Ashley’s Pafco 44R endorsement and his own 44R endorsement. Section 18(a)(ii) of the 44R endorsement applies to resolve which insurer must pay him. It provides:18. The following rules apply where an eligible claimant is entitled to payment under family protection coverage under more than one policy:
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(ii) if he or she is not an occupant of an automobile, such insurance in any policy in the name of the eligible claimant is first loss insurance and any other such insurance is excess. [40] Since the Kent policy is in Joe’s name, it is the first loss insurance for his damages that exceed his share of the $200,000 coverage available under Ashley’s OAP-1 uninsured motorist coverage. Kent alone is responsible for Joe’s excess claim.
[41] The remaining plaintiffs do not have 44R policies in their names, so s. 18(a)(ii) does not apply to them. But they too are eligible claimants under both Ashley’s Pafco 44R endorsement and Joe’s Kent 44R endorsement since Ashley was an insured person under both policies. Since neither policy designates first loss insurance in their case, s. 18(d) governs. It provides in relevant part:18. The following rules apply where an eligible claimant is entitled to payment under family protection coverage under more than one policy:
...
(d) all applicable excess family protection coverage shall be similarly apportioned on a pro rata basis…. [42] Pursuant to this provision, Pafco and Kent bear pro rata responsibility for excess damages payable to the remaining plaintiffs beyond their share of the $200,000 uninsured coverage that is available to them under Ashley’s OAP-1. . Primmum Insurance v. L’Unique Assurances Générales
In Primmum Insurance v. L’Unique Assurances Générales (Div Court, 2022) the Divisional Court reviews some auto insurance SABS law that applies to indemnification between insurers:Statutory and Regulatory Framework
[21] An insurer paying SABs is entitled, in certain circumstances, to indemnification from another insurer for benefits paid. Subsection 275(1) of the Act provides:The insurer responsible under subsection 268(2) for the payment of statutory accident benefits to such classes of persons as may be named in the regulations is entitled, subject to such terms, conditions, provisions, exclusions and limits as may be prescribed, to indemnification in relation to such benefits paid by it from the insurers of such class or classes of automobiles as may be named in the regulations involved in the incident from which the responsibility to pay the statutory accident benefits arose. [22] The wording of s. 275(1) makes it clear that entitlement to indemnification is not absolute; it is “subject to such terms, conditions, provisions, exclusions and limits as may be prescribed”. Some of the terms and conditions, etc. are set out in the balance of s. 275. For example, the fault determination rules apply to indemnification for the first $2,000 of SABs paid (ss. 275(2) and (3), respectively).
[23] Other terms and conditions, etc. are prescribed by a regulation pursuant to the Act (“Automobile Insurance”, R.R.O. 1990, Reg. 664 (“the Regulation”)). Section 9 of the Regulation provides definitions for some of the terms that appear in section 275 of the Act. In addition, section 9 sets out the criteria for entitlement to indemnification. Only when those criteria are met is an insurer paying SABs entitled to indemnification from another insurer.
[24] In s. 9(1) of the Regulation, a “first party insurer” is defined as “the insurer responsible under s. 268(2) of the Act for the payment of statutory accident benefits”. The insurer required to indemnify a first party insurer pursuant to section 275 for SABs paid is defined by s. 9(1) of the Regulation as the “second party insurer”.
[25] The circumstances in which a first party insurer is entitled to indemnification from a second party insurer for SABs paid are set out in ss. 9(2)(a) and (b) of the Regulation. For the purpose of the indemnity dispute between Primmum and L’Unique, only s. 9(2)(a) is relevant. It provides:A second party insurer under a policy insuring any class of automobile other than motorcycles, off-road vehicles and motorized snow vehicles is obligated under section 275 of the Act to indemnify a first party insurer,
(a) if the person receiving statutory accident benefits from the first party insurer is claiming them under a policy insuring a motorcycle and,
(i) if the motorcycle was involved in the incident out of which the responsibility to pay statutory accident benefits arises, or ...
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