Serious Injury Following a Car Accident: What if there is not Enough Insurance? Underinsured Motorist Protection

Serious Injury Following a Car Accident: What if there is not Enough Insurance? Underinsured Motorist Protection

After a car accident, particularly when there are serious injuries and/or multiple people injured, it can be overwhelming to understand and deal with the various insurance claims involved. One important question is whether there will be enough insurance coverage to cover the financial and other losses experienced by all of the injured parties. We review the answer, focusing on the SEF44 underinsurance coverage endorsement that is added to most insurance policies in Canada. 

Each province in Canada has a mandatory minimum amount of liability insurance required to legally operate a vehicle. The mandatory minimum is set by legislation and varies by province, with Nova Scotia requiring $500,000. The rest of the Atlantic Provinces (PEI, NB, NL) require $200,000 in liability coverage. Many drivers purchase additional coverage, and some Canadian insurance companies will not sell policies with less than $1,000,000 in liability coverage.  Many USA States have very low or no mandatory minimum limits.

Having additional liability coverage protects you as a driver, in the event of accident that is your fault, from becoming personally responsible for any amounts claimed by injured parties. In an accident where you are not at fault, having additional liability coverage can also protect you against other underinsured drivers, if you have an SEF 44 endorsement on your policy. SEF 44 is an optional insurance add-on. It is not required in Nova Scotia but is often included where the liability limit of the policy is more than the minimum required by law. You can add an SEF 44 endorsement for a small extra premium.  

For example, Person A is injured in an accident where the at-fault driver, Person B, carries the minimum policy limit in many provinces of $200,000. Person A is seriously injured and will not be able to return to any form of employment. Their damages will likely exceed Person B’s minimum policy limit of $200,000. Person B is underinsured. Person A can only recover the policy limit ($200,000) and must obtain any excess from Person B personally. It can be difficult to collect damages from an underinsured driver and can be impossible if Person B does not have any assets.  

If Person A has the SEF44 endorsement on their policy, they can make a claim for underinsured coverage up to the total amount of their liability limit. Therefore, if Person A carries $1,000,000 in liability coverage, they can collect $200,000 from Person B’s insurance company, and up to $800,000 from their own insurance company through SEF44.  This coverage applies any time the at-fault party does not carry enough insurance. 

Of note, SEF 44 will only cover the difference between your policy limit and the policy limit of the at-fault driver. If you and the at-fault driver each have a $1,000,000 policy, SEF 44 is not available, even if your damages are more than $1,000,000. In this scenario, the at-fault driver is not considered “underinsured” according to the SEF 44 endorsement, because the policy limits are the same. This remains true even if there are multiple injured parties sharing the at-fault party’s available limit (see Van Bastelaar v Bentley, 2011 ONCA 660). 

Consider another example: A family of four are all injured in a collision that is not their fault. The at-fault driver carries the minimum limit in Nova Scotia of $500,000. The injured family carries a liability policy with a $1,000,000 limit and the SEF 44 endorsement. The maximum amount the family collectively can recover from the at-fault driver’s insurance company is $500,000, and an additional $500,000 under SEF44.

If you have questions about SEF 44 or any other coverage you have after an accident, please do not hesitate to contact us. We offer free consultations in accident cases, with no obligation to retain us moving forward.

Carter Simpson has prepared this document for information only.  It is not legal advice.   You should consult Carter Simpson about your unique circumstances before acting on this information. Carter Simpson excludes all liability for anything contained in this document and any use you make of it.