An insured is entitled to deduct all insurance proceeds received by an insured, including the costs incurred in obtaining the benefits.
The Insurer was entitled to deduct the gross sum rather than the net sum received by the Insureds from the at-fault underinsured motorist.
Green v. State Farm Mutual Automobile Insurance Co., [2009] O.J. No. 2713, June 16, 2009, Ontario Superior Court of Justice, R.C. Boswell J.
The Insureds were Ontario residents who were injured in a motor vehicle accident in Florida. They sued the at-fault driver in Florida and recovered damages at his policy limit, $100,000 USD each. After legal expenses the net amount recovered by the Insureds was approximately $120,000 USD total. The Insureds then pursued damages from their own insurer under the underinsured motorist endorsement of their own automobile insurance policy. The matter went to trial and a jury assessed the Insureds damages at $177,500 and $682,000 respectively. The policy clearly indicated that the Insurer was entitled to deduct from the jury award the amount received by the Insureds from the American insurer. At issue was whether the amount “received” by the Insureds was the gross amount of the award or the net amount after legal expenses.
The judge held that there was no ambiguity in the insurance contract and that a plain reading showed that the Insurer was entitled to deduct all funds already obtained by the Insureds in compensation for their injuries with no allowance made for any costs incurred by them in pursuing recovery. The Insureds’ attorneys in the Florida litigation received the full $200,000 USD in trust as agents for the Insureds and these funds were presumably disbursed in accordance with the Insureds’ instructions. The Insurer had no control over the disbursement of the funds and no method for determining what expenses were reasonably incurred in recovering the funds. Given the unambiguous terms of the insurance contract there could be no reason to read in a term that limited the Insurer to deducting the net amount when this would leave the Insurer in the uncertain position of not knowing what expenses might properly be deducted from the gross receipts to arrive at a net sum. When making their claim against the Insurer under the underinsured motorist endorsement, it was open to the Insureds to claim special damages for the costs incurred to recover the funds already received.
This case was originally summarized by Emily M. Williamson and originally edited by David W. Pilley.
