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

After a car accident, the at-fault party is responsible for compensating the other driver for any damage they have caused. This can include the cost of vehicle repairs as well as compensation for injuries, which can include time off work in more serious cases. This can get expensive, which is why all drivers are legally required to have car insurance in Canada. But what happens if the at-fault driver in a motor vehicle collision doesn’t have enough insurance to cover your losses?

Each province has a mandatory minimum amount of insurance you must have to legally operate a vehicle. In Nova Scotia, you must have at least $500,000 in liability coverage which will be available to pay the injured person if you are responsible for the accident. In PEI and New Brunswick, the minimum insurance policy is $200,000.

Now consider an example:

Imagine a Nova Scotian is hit by a Prince Edward Islander with the PEI minimum policy ($200,000). Now imagine the Nova Scotian’s claim is worth $500,000. The damages are a lot more than the Islander’s insurance will cover. In other words, the Islander is underinsured. The Nova Scotian can only recover the policy limits ($200,000) without pursing the Islander personally. Most people do not have the ability to pay large sums out of pocket. So, is the Nova Scotian out of luck? Not if they have an SEF 44 endorsement on their own car insurance policy.

SEF 44 Endorsement - The Basics

“SEF 44” is an endorsement on your automobile insurance which gives you extra protection if you are in a car accident and the person who hit you does not have enough insurance to pay your claim. Ask your broker or insurer if you already have this coverage and if not, you can add it for a small additional premium.

Purpose of SEF 44

SEF 44 protects you in case the person who hits you is underinsured. If the at-fault driver has less liability insurance than you, your insurance policy will be available to cover the difference.  In our example, if the Nova Scotian has a $500,000 policy with SEF 44 coverage and his claim is worth $500,000, she can claim the $300,000 shortfall that the Islander was not insured for under her own auto policy. Similarly, if a Nova Scotian with a policy providing $1,000,000 in liability coverage is hit and injured by someone with only the minimum policy limits of $500,000, their SEF44 coverage will be available for up to $500,000 in additional insurance.

Limits of SEF 44

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. If not already included, you can add an SEF 44 endorsement for a small extra premium.  

SEF 44 will only cover the difference between your policy limit and the policy limit of the person who hit you. If you are covered up to $500,000 (minimum limit in NS) and you get hit by someone who is also covered up to $500,000, SEF 44 is not available, even if your damages are more than $500,000. In this scenario, the at-fault driver is not considered “underinsured” according to the SEF 44 policy, because his policy limit ($500,000) is the same as the family’s limit (see Van Bastelaar v Bentley, 2011 ONCA 660).

When there are multiple people injured in the same car, all claimants must share the available coverage, including any additional amounts under SEF 44. Consider another example: A man with a $500,000 policy limit hits a family of four with a $1,000,000 policy limit. All four family members are injured and their total damages exceed $1,000,000.  The maximum amount they can recover from the at-fault driver’s insurance company is $500,000, and an additional $500,000 under SEF44, even though their collective claims exceed that amount.

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.