Canadian Lawyer

ing bad advice to customers." When the Ontario government went to a no-fault system and set up a framework for mandatory insurance with a $200,000 min- imum for liability insurance, the insurance companies banded together and said that, even though there's a minimum, that amount doesn't make any sense — let's do $1 mil- lion minimum as the common purchase. So, although, theoretically speaking, you could buy a car and get a $200,000 liability policy, nobody realistically does that. The lowest you'll see is $500,000, Merkur says, with almost everyone having a $1-million liability policy. "Realistically, when we take these cases and we get them far, there's often very generous offers that come forward because no insur- ance brokers want to see a judgment that says it's negligence for an insurance broker to sell a $1-million policy without warning to the person that it's inadequate," he says. "That would cause major problems for their industry because every insurance broker would be potentially sued for selling a $1-million policy without having a sign-off against a $2-million policy." However, law or not, Merkur says insur- ance brokers should make sure that, when somebody chooses a $1-million liability pol- icy, it's expressly against their advice. The sta- ple should be $2 million and the right num- ber is $5 million, but something in between the two numbers would be reasonably accept- able, he notes, adding that, if he was a broker, he would insist that every person to whom he sold insurance sign a document saying that, despite the advice given, I've elected to pur- chase a $1-million liability policy. Merkur gives the example of a client who was struck by a car and estimates her dam- ages at $3 million to $5 million dollars, but the driver has the common $1-million liabil- ity policy. "So, we said to the insurance company, pay your million but it's not going to be enough," he says. He notes that lawyers can have asset searches done and go after the driver's house and car or have wages garnished. "It has the potential to have a major, life-changing impact on persons who cause accidents," he says. "It doesn't usually come to that, because lawyers are pretty practical. If I know the person I'm pursuing person- ally has almost no assets, it's not a good use of my time and resources. It doesn't happen that often, but if somebody has any assets or a good job, they should be worried about law- yers at good firms pursuing them personally for amounts over their insurance limits. "It really frustrates us," Merkur says. "There's nothing I hate more than having to explain to someone who suffered major life-changing injuries that I'm going to do the best job in the world and that means getting you a million bucks." Ian Furlong, also a partner at Thomson Rogers, notes that, particularly with auto insurance, there's one standard policy to pur- chase if you're not a commercial business and it's "a take-it-or-leave-it situation." He says that when an insurer sells some- body insurance, they're entering into a fidu- ciary relationship with that person — they are their insured, not a stranger. "The insurer has all the knowledge. I do think, in that context, given that the insurer has a duty of good faith to its insured, that there is an obligation to tell the insured about optional benefits and what it would cost to increase third-party insurance limits." Furlong adds that the price difference between the $1-million and $2-million poli- cies is modest, with the vast majority of the cost being for the first million — because most of the claims that come forward are under that limit, there's not a huge amount of risk to the insurer to provide that extra million. But a lot of times that conversation never happens. "Once the policy is placed, you get a pack- age in the mail that tells you about optional benefits. I think brokers and insurers that are selling directly to the public need to have those conversations early on before the policy is purchased." Furlong notes that, with most insurers, auto policies include a family protection endorsement. It's relatively inexpensive, but it means that if you're injured by somebody in a car accident and they don't have insurance or have less than you, your insurance company will make up the difference. That's an import- ant piece of information — and coverage — for a person to have. It comes down to not enough communication. "They've got to spend some time telling potential customers what it is they are actu- ally buying," he says. Furlong says he's not being critical of insur- ers, but he thinks it's easier to put the obliga- tion on them rather than the public "because these are their products and they know how their products are designed to work." Having extra coverage is especially import- ant since the government cut the benefits available to the catastrophically injured www.lawtimesnews.com 25

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