Is a plaintiff entitled to recover damages that exceed the amount of the policy limits of the at-fault party?

Counsel contends for there to be a shortfall in insurance compensation the insured must be legally entitled to recover damages that exceed the amount of the policy limits of the at-fault party regardless of the amount received by the insured. In support, counsel refers to a decision of this court in Sadhu v. Driver, 2009 CanLII 18699.

In Sadhu the plaintiff settled for less than the policy limits of the at-fault driver without entering into a limits agreement and then brought a claim against her own insurer for underinsurance coverage. The court (Arrell J.) stated that the plaintiff was not entitled to pursue a claim against her own insurer for underinsurance coverage after settling with the tortfeasor for less than the tortfeasor’s insurance policy limits. Arrell J. reached this decision on the basis that the plaintiff did not obtain the consent of her own insurer when she settled with the at-fault driver for an amount less than the limits available under the at-fault driver’s insurance policy. The court in Sadhu distinguished this situation from the situation in the case of Somersall v. Friedman, [2002] SCC 59.