Court orders Royal & SunAlliance to pay in Family Protection Coverage Endorsement case

The Ontario Court of Appeal has ordered Royal & SunAlliance Insurance Company of Canada to pay Cdn$1 million under the Family Protection Coverage Endorsement (FPC Endorsement) in a motor vehicle accident involving an uninsured driver.Royal & SunAlliance said their net potential liability was Cdn$0, based on a deduction of the insured’s Cdn$1 million liability limit from the endorsement limit, but the court disagreed. In Gostic v. Squance, a family of four was involved in a motor vehicle accident with an uninsured driver. The uninsured driver died in the accident, and the family of four sustained major injuries.Under the liability coverage, Royal & SunAlliance paid Cdn$1 million for the injuries sustained by the policyholder’s son, who was not wearing a seatbelt. The insurance company made the payment because it found the driver was negligent in not ensuring her son was wearing a seatbelt.The family, however, stated they were also covered under the FPC Endorsement – for which they had paid in addition to their policy to ensure coverage – because the other driver was not insured.Royal & SunAlliance argued the amount it owed was the maximum liability of Cdn$1 million (the limit of the FPC Endorsement) minus $1 million for the amount available under policyholder’s liability coverage (because Royal & SunAlliance said the policyholder was negligent in not ensuring that her son was wearing a seatbelt), and therefore the company’s net liability was reduced to $0.The court disagreed, saying no one insured under the Royal policy is jointly liable to the driver of the vehicle (the mother), the policyholder’s husband and the son who didn’t receive money under the policy.