Insurance corner: How much liability coverage is enough?

Is $1 million enough liability coverage? The short answer to that question is no.

Consider the cost of living in the 21st century - housing, cars, wages, and education is significantly more expensive than 5 to 10 years ago. Consider that we live in a litigious society, law firms are advertising on radio, television, newspapers and billboards for this reason.

How do you protect yourself from unexpected accidents and if an accident happens, how much will it cost to take care of your obligations and expenses?

Below are two cases reported by Courts in Canada. All of the cases were heard in 2005, so the events, facts and award assessments are recent.

Case #1

Value - $959,587.00

Location - British Columbia

Automobile Accident

Summary: The injured party was involved in a rear end accident and pushed into the car ahead. The lady suffered nerve damage to her spine which the doctors diagnosed as permanent. She had a constant dull ache in her left buttocks, leg and foot. She also experienced periodic numbness and tingling. She was in pain everyday and could not get a full night's sleep. She had to give up most of her recreational activities but was able to work. It was likely that she would lose the opportunity to compete for other jobs.

The breakdown of her award was as follows:

Past Loss of Income: $4,740.00 plus interest

Cost of Future Care: $101,246.00 - (likely for ongoing treatments, medication)

Future Loss or Impairment of Capacity to Earn Income $750,000.00

General Damages: $100,000.00 (pain and suffering)

This case was referred to the BC Court of Appeal as it was felt that the award was too high. The Court of Appeal upheld the decision.

Case #2

Value: $12,952,949.00

Location: Hamilton, Ontario

Swimming Accident

Summary: The injured party slid down a slide on her knees into an above ground pool, landed head first on the bottom of the pool fracturing her neck, she was rendered a quadriplegic. She was 15 years old at the time.

The judge assessed the awards as follows:

General Damages $302,000.00 (pain and suffering)

Family Law Act $250,000.00 (to her parents, and siblings for loss of companionship)

Attendant Care $167,170.00

Medical $19,538.35

Future Lost Income $800,000.00

Future Care Costs $8,843,000.00

OHIP $2,500,893.20

Miscellaneous Expenses $71,248.00

These cases indicate that $1,000,000 in liability coverage is not enough. The cost of medical care and the replacement of future income significantly impact the judgments. Liability policies are designed to provide protection from accidents that may occur as a result of the use or ownership of property, however that protection is limited to the amount of coverage purchased. That means individuals become directly responsible for judgments in excess of the coverage limit. Your home, savings, investments and even your wages can be taken to satisfy the outstanding debt. Often the responsible party has to declare bankruptcy.

We recommend you speak with your insurance broker about the need for higher liability limits. Request a quote for a personal or commercial umbrella liability policy, which picks up where standard liability leaves off.

The BC auto case - Fox v. Danis

The Ontario auto case - Walker v Ritchie and Howard Marcus Limited

The Ontario homeowner case - Walford v Jacuzzi Canada, Pioneer Pools, Ester Williams Pools Limited, W.H. Boyle, Keven Boyle, Clarence Walford and Marion Walford

This article was provided by Cathy Wismer, Casualty Program Manager, Gore Mutual Insurance Company.

Aim Insurance Brokers Ltd. 705-431-5622

General insurance brokers with offices in Innisfil and Angus. We will provide material from within our office and other members of the industry to hopefully help you have a greater understanding of home, auto and business insurance products.