Tara Miller – March 2016
Personal Injury… What are insurance limits, why do they matter to you and how can you protect yourself and your family?
When you or a loved one have been injured in a motor vehicle accident as a result of the negligence of another driver, the other driver’s auto insurance policy responds to pay your personal injury claim to the limits of the auto insurance they have. The at-fault driver is then personally responsible for any amount of your personal injury claim over and above their available auto policy insurance limits.
Other than knowing that a driver must have the provincially mandated minimum insurance limits to cover third party personal injury and property damage claims (in Nova Scotia all drivers are required to have at least $500,000), you have no control over what that driver’s insurance coverage may be. This can be a very real concern as the amount of the other driver’s auto policy insurance limits can have a huge impact on your ability to recover fair and full compensation for personal injury damages, particularly in accidents which leave you or your loved ones with significant injuries.
Consider the following scenarios:
- Jane is 30 years old and has been teaching for 5 years when she is hit by a car which goes through a red light, leaving her paralyzed from the neck down. The car which hits her has minimum insurance limits of $500,000. As a result of her injuries, Jane is unable to return to any work and has significant expenses arising from her injuries which will continue into the future. She had been making $50,000/year and expected to work until she was 60 years old. Her income loss claim alone as a result of the accident of $50,000/yr x 30 years will be well in excess of $1,000,000 but the most she can expect to receive from the at-fault driver’s insurance is the limits of $500,000. If the driver who hit her has personal assets, then she will pursue the driver for the difference in the value of her claim vs. the available insurance limits. But if the driver who hit her has no assets, then there is a very real possibility the most she will be able to recover is the available insurance policy limits of $500,000.
- John is in a van with 5 friends returning from a hockey trip. They all work together as welders and are hit by a car which goes through a red light. All 6 friends have injuries including broken bones but they are able to get back to work after a year off to recover. The car which hit them has the minimum insurance limits in Nova Scotia of $500,000 which must be shared between all 6 victims. $500,000 divided between 6 people who all have injuries and have lost time from work does not go far and may very well not fully compensate them for their injuries. If the driver who hit them has personal assets, then they will pursue that driver for the difference in the value of their claims vs. the available insurance limits. But if the driver who hit them has no assets, then like with the example of Jane above, there is a very real possibility the most they will be able to recover is the available insurance policy limits of $500,000.
While you are powerless to control what insurance an at-fault driver may have to respond to a personal injury claim, you can protect yourself and your family by ensuring you have your own additional insurance coverage for situations when there is simply not enough available insurance to fairly and fully respond to your personal injury claim.
In Nova Scotia, this protection comes in the form of additional insurance to your auto policy called a SEF No. 44 endorsement or “Family Protection Endorsement”. While it is not mandatory to have in an auto insurance policy, SEF 44 insurance coverage can be purchased for a small additional premium ($17/year for my family) and is typically included by most insurance companies in their auto insurance packages. The purpose of the SEF 44 policy is to provide additional coverage to named insureds, as well as their family, for injuries or death resulting from motor vehicle accidents involving uninsured or inadequately insured motorists. It has been referred to as “last ditch” or “safety net” insurance as it is intended to be used to help restore the insured to their pre-accident position when they cannot recover damages through any other sources.
SEF 44 insurance is excess insurance which will pay if the other driver’s policy limits are less than your SEF 44 policy limits. SEF 44 insurance cannot be stacked on top of available insurance limits. For example, if an at-fault driver’s insurance limit is $500,000 and your SEF 44 limit is $1,000,000, the maximum you could obtain through the SEF 44 policy is an additional $500,000. In this scenario:
- if the total value of your personal injury claim was $700,000, then you would recover $500,000 from the at-fault driver’s insurance and $200,000 from your SEF 44 insurance;
- if the total value of your personal injury claim was $1,000,000, then you would recover $500,000 from the at-fault driver’s insurance and $500,000 from your SEF 44 insurance; and
- if the total value of your personal injury claim was $1,500,000, then you would recover $500,000 from the at-fault driver’s insurance and $500,000 from your SEF 44 insurance. There would be a shortfall of $500,000 as the two policies do not stack on top of each other ($500,000 + $1,000,000) but rather you are entitled to the difference in excess between the two policies ($1,000,000 – $500,000).
For more information on this or any other issue arising from your motor vehicle accident claim for personal injury, please contact Tara Miller at firstname.lastname@example.org at MDW Law.