No-Fault Concepts in Automobile Insurance

Transcription

1 The Insurance Institute of Canada C14 Automobile Insurance Part 1 (Ontario) Textbook Addendum Revised September 2010 (To be used with the 2009 edition.) Study 1, page 12, replace Exhibit 1 1 with IBC 2009 Facts sheet attached. Study 2, pages 2 and 3, in the last paragraph on page 2 and in the second paragraph on page 3, add a person to those persons (owner and driver) who can be held legally liable for the damages caused by an automobile accident. The lessee Study 2, page 5, add second Case as follows: Case: If Paul does not have his own automobile insurance policy (for example he does not own a vehicle) Marie will look to the vehicle owner s policy to recover. This is because both the vehicle owner and the driver can be held liable. In this case, Marie will look to Mike s policy to recover since Mike owns the vehicle. If Marie chooses to recover from her own insurer, it can subrogate against Mike s insurer. Study 2, pages 9, 10, delete these pages. Study 2, page 11, delete the first two paragraphs. Study 2, page 12, delete Summary point 4. Study 3, page 2, after the Introduction add section as follows: No-Fault Concepts in Automobile Insurance -A widely misunderstood phrase- But what does no-fault really mean? No other insurance-related term has been more widely misunderstood by the general public than no-fault. In the realm of automobile insurance, it means that claims are settled with an insured without regard for the traditional legal liability concepts (discussed in detail in other studies), and that an insured looks to his or her own insurer to recover after suffering a loss. Many consumers, however, think it has to do with whether their premium will go up following a claim. Page 1 of 11

2 The idea of no-fault automobile insurance was explored by North American academics in the late 1920s to early 1930s. However, no-fault insurance in any form was not implemented until later. One of the first automobile insurers in North America to offer some form of no-fault coverage was Saskatchewan Government Insurance (SGI), which was established in No-fault concepts must be considered separately for vehicle damage and for injuries. No-fault concepts for vehicle damage apply when there is loss of or damage to the insured automobile. No-fault concepts for injuries apply when it is a person who has suffered a loss in the form of an injury. Study 3, page 5, replace the last two paragraphs as follows: -Ontario threshold- In 1990, Ontario enacted a threshold no-fault plan. The original definition of threshold and the benefits available have been modified by legislative amendments made in 1996, 2003, and most recently in Lawsuits are now allowed for non-economic loss (pain and suffering) only when the insured person (as defined by the policy) has a) died, or b) sustained permanent serious disfigurement, or c) permanent serious impairment of an important physical, mental or psychological function. Study 4, page 4, at the end of the excerpt from the Insurance Act add clause (2) as follows: (2) Subsection (1) does not invalidate such statutory accident benefits as are set out in the Statutory Accident Benefits Schedule. Study 4, page 7, under Misrepresentation or violation of conditions renders claim invalid, at the end of Section 233(1) add clause (2) as follows: Section 233. (2) Subsection (1) does not invalidate such statutory accident benefits as are set out in the Statutory Accident Benefits Schedule. Study 4, page 12, under the description of Accident Benefits add items as follows: non-earner benefits caregiver expenses Study 4, Page 15, replace the last two paragraphs as follows: To the best of my knowledge, all listed drivers are qualified to hold a driver s licence, and the details in Sections 1 to 6 and 9 are correct. Warning the Insurance Act provides that where Page 2 of 11

3 (a) an Applicant for a contract, ( i) gives false particulars of the described automobile to be insured to the prejudice of the insurer, or (ii) knowingly misrepresents or fails to disclose in the application any fact required to be stated therein; or Study 4, page 17, replace the last two paragraphs as follows: I am applying for automobile insurance based on the information provided above. With respect to this application or any renewal or change to my coverage, I authorize you to collect, use and disclose my driving record, auto insurance history and auto claims history, and those of the listed drivers from whom I declare I have obtained consent for these purposes as permitted by law for the limited purposes necessary to assess the risk, investigate and settle claims, and detect and prevent fraud. The authorization of the applicant is to allow the insurer to obtain relevant information such as past insurance records, driving records, past claims, and convictions, among other information, for the purpose of accurately rating the applicant's automobile insurance premiums, investigating and settling claims, and such other purposes as the law permits. Study 4, page 19, replace the Ontario Application of Automobile Insurance (OAF1) with the attached. Study 5, replace study with the attached. Study 6, replace study with the attached. Study 7, page 6, after the first paragraph add paragraph as follows: If the stereo is factory installed equipment it is considered part of the vehicle for the purposes of determining the actual cash value for loss or damage. However, if the electronic accessories or equipment are other than factory installed equipment the policy limits the total actual cash value payable for loss or damage to this equipment to a total of $1,500. Study 9, page 2, after the Territory (Where You Are Covered) section, add section as follows: Occupant Defined In the OAP 1, occupant is defined as a person, including the driver, in or on an automobile, or getting into, on, out of, or off an automobile. Study 10, page 13, replace the first paragraph as follows: Page 3 of 11

4 This means both before a loss occurs and after. Under the Regulations insurers have the right to inspect vehicles at any reasonable time. This is intended as a deterrent to fraud. Study 10, page 13, replace bullet point (c) as follows: (c) a request in writing that an appraisal be carried out in accordance with section 128 of the Act, (i) (ii) is made by the insured, or is made by the insurer and the insured agrees. Study 10, page 14, replace the first paragraph as follows: This section sets out the conditions under which the parties can resolve a disagreement by appraisal. The Insurance Act stipulates the appraisal process that involves each party hiring an appraiser to evaluate the matter under dispute. If these appraisers cannot agree on the evaluation both appraisals are then given to an independent third appraiser, or umpire, who decides which appraisal is correct. Study 10, pages15-18, replace the section Termination as follows: Termination Many ordinary commercial contracts do not have provision to allow termination of the contract by either party, but insurance contracts normally do. The insured or the insurer may cancel a policy. At one time insurers did not have to justify a cancellation; this is no longer the case for automobile policies in Ontario. The acceptable reasons for cancellation are very limited and an insurer must get formal exemption from the Superintendent of Insurance if it does not comply with the rules set out in legislation. Exemptions are not readily given and are beyond the scope of this course. The purpose of the next condition is to state in detail what an insurer must take into consideration when terminating an insurance contract, how and when it may proceed with the termination, and the information that must be provided in the notice of termination. 11. (1) Subject to section 12 of the Compulsory Automobile Insurance Act and sections 237 and 238 of the Insurance Act, the insurer may, by registered mail or personal delivery, give to the insured a notice of termination of the contract. Note the specific reference to other legislation. Section 12 (1) of the Compulsory Automobile Insurance Act states: Page 4 of 11

5 Where a contract of automobile insurance has been in effect for more than 60 days, the insurer may only terminate the contract for one or more of the following reasons: 1. Non-payment of, or any part of, the premium due under the contract or of any charge under any agreement ancillary to the contract. 2. The insured has given false particulars of the described automobile to the prejudice of the insurer. 3. The insured has knowingly misrepresented or failed to disclose in an application for insurance any fact required to be stated therein. 4. For a material change of risk within the meaning of the statutory conditions referred to in section 234 of the Insurance Act. Sections 237 and 238 of the Insurance Act contain the same provisions as well as setting out the procedures for exemptions from these rules. It immediately becomes clear that an insurer cannot cancel an automobile policy without good cause or it will run into legal difficulties. If there is a valid reason for cancellation, it must be done in strict compliance with the condition. The insurer may terminate a policy by giving written notice either by registered mail or personal delivery. Subcondition (1.1) and (1.2) of Condition 11. spell out the precise amount of time the insurer must give when terminating the contract. (1.1) If the insurer gives a notice of termination under subcondition (1) for a reason other than non-payment of the whole or any part of the premium the notice of termination shall terminate the contract no earlier than, (a) the 15th day after the insurer gives the notice, if the insurer gives the notice by registered mail; or (b) the fifth day after the insurer gives the notice, if the insurer gives the notice by personal delivery. (1.2) Subject to subcondition (1.7), if the insurer gives a notice of termination under subcondition (1) for the reason of non-payment of the whole or any part of the premium the notice of termination shall specify a day for the termination of the contract that is no earlier than, (a) the 30th day after the insurer gives the notice, if the insurer gives the notice by registered mail; or (b) the 10th day after the insurer gives the notice, if the insurer gives the notice by personal delivery. Page 5 of 11

6 Subcondition (1.7) permits the insurer to terminate the insurance contract for non-payment of premium in accordance with subcondition (1.1) rather than subcondition (1.2) if the insurer has issued termination notices for non-payment on two previous occasions. (2) This contract may be terminated by the insured at any time on request. When an insured wishes to cancel a policy, it may be done at any time on request. There is no requirement in the policy whereby the insured is required to return the policy to the insurer, however, for protection, the insurer should either obtain the policy, signed off by the insured, or obtain written authorization from the insured to cancel. The practice of cancelling by oral instruction is risky, because of the difficulty of proving the request for cancellation was in fact made by the insured. (3) Where this contract is terminated by the insurer, (a) the insurer shall refund the excess of premium actually paid by the insured over the proportionate premium for the expired time, but in no event shall the proportionate premium for the expired time be deemed to be less than any minimum retained premium specified; (b) if the termination is for a reason other than nonpayment the refund shall accompany the notice, unless the premium is subject to adjustment or determination as to the amount, in which case, the refund shall be made as soon as practicable. (c) if the termination is for the reason of non-payment the refund shall be made as soon as practicable after the effective date of the termination. When the insurer cancels a policy the cancellation and premium refund requirements must be closely followed, otherwise a cancellation may be found invalid. The insurer is required to refund the excess of the premium actually paid over the pro rata premium for the expired time subject to any minimum retained premium stated in the policy. This refund is to accompany the letter of cancellation unless it is subject to adjustment; then it must be made as soon as practicable. Sometimes a registered letter of cancellation is returned to the insurer by the post office because the insured has moved and cannot be located. As long as the insurer has followed the termination provisions, the cancellation is effective, provided the insurer retains evidence of its attempt to notify the insured of termination. In such an event, the returned registered letter of cancellation should not be opened because to do so may destroy the evidence. This was the subject of an actual court case in which cancellation was upset because the insurer had opened the returned registered letter of cancellation. Page 6 of 11

7 (4) Where this contract is terminated by the insured, the insurer shall refund as soon as practicable the excess of premium actually paid by the insured over the short rate premium for the expired time, but in no event shall the short rate premium for the expired time be deemed to be less than any minimum retained premium specified. When an insured cancels a policy, the refund is calculated on a short rate basis subject to any minimum retained premium stated in the policy. This produces a slightly smaller refund to offset the insurer s expenses in issuing and then cancelling the policy before a substantial part of the premium is earned. Summary (5) For the purpose of clause (a) of subconditions (1.1) and (1.2), the day on which the insurer gives the notice by registered mail shall be deemed the day after the day of mailing. (6) all references in this condition to times of day shall be interpreted to mean the time of day in the local time of the place of residence of the insured. Insured may cancel at any time No special conditions apply Refund premium on short rate basis subject to minimum retained premium Refund payment to be made as soon as possible Insurer may terminate policy by following strict conditions Reason for termination must be valid within the terms of the Automobile Insurance Act and the Insurance Act Give 15 days after the day the insurer gives written notice by registered mail (30 days after if policy is being cancelled for non-payment) OR give 5 days written notice, after the day the insurer personally delivered (10 days after if policy is being cancelled for non-payment) Refund premium on pro rata basis subject to minimum retained premium Refund payment must accompany notice of cancellation unless premium is subject to adjustment; then it must follow as soon as possible Notice begins to run on the day after the day of mailing Study 11, page 16, under Removing Depreciation Deduction (OPCF 43), replace the second last sentence as follows: If the vehicle is a total loss, the insurer pays the value or price of the vehicle (as defined in the endorsement wording) without deduction for depreciation. Page 7 of 11

8 Study 11, page 18, after the Agreement Not to Rely on SABS Priority of Payments Rules section add section as follows: Added Coverage to Offset Tort Deductibles (OPCF 48) Under the standard Owner s Policy wording, claims payment for a bodily injury liability suit for non-economic loss is subject to a per person deductible. This endorsement offsets or reduces the deductible as permitted in the Regulation. In effect the insured can buy-down the bodily injury tort deductible. The coverage provided is a first-party coverage that is, the insured claims the reduction in deductible from his or her own insurer not from the third-party insurer. Study 12, page 4 add numbered points to the list of unfair and deceptive practices as follows: 12. The use of a document in place of a form approved for use by the Superintendent, unless none of the deviations in the document from the approved form affects the substance or is calculated to mislead. 13. Any examination or purported examination under oath that does not comply with the requirements under the Act or the regulations. Study 12, page 4 under the numbered list of unfair and deceptive practices add as follows: The legislation also identifies as unfair or deceptive any practice that: Is used to attempt to obtain a different premium for an insurance policy than the premium set out on the policy Is used to refund or discount all or part of the premium in any form to the person applying for insurance Uses credit information for the purposes of processing an application for automobile insurance responding to a request for automobile insurance renewal of any automobile policy. In addition, when an applicant requests an automobile insurance quotation, the insurer approached must provide the lowest rate it makes available taking into consideration all of the circumstances related to the application. Where the insurer is affiliated with other insurers or has other means of distribution, the insurer must provide the lowest rate available from any of those affiliated insurers or means of distribution. Study 13, page 5, replace the last bullet point in the list opposite the margin heading Sensitive issues as follows Lowest applicable rate must include rates available from any affiliate of the insurer The improper use of credit information Page 8 of 11

9 Study 14, page 9, in the last paragraph add New Brunswick to the provinces with Direct Compensation plans in effect. Study 14, page 10, under Rate Control add two provinces to the list as follows: British Columbia Public Utilities Commission Prince Edward Island Study 14, page 11, replace the list of provinces opposite the margin heading No Rate Boards as follows: Saskatchewan, where the province runs the automobile insurance system Northwest Territories Nunavut Quebec Yukon Study 15, page 2, in the second paragraph amend the first sentence to read as follows: On average, most drivers do not experience difficulty obtaining automobile insurance through regular markets (also referred to as voluntary markets). Study 15, page 3, under The Facility Association, after the first paragraph add paragraphs as follows: In provinces where the Association operates, the underwriting rules of the various automobile insurers serve as guidelines to determine whether a risk qualifies for insurance through the voluntary market. These rules are a list of grounds for which the insurer declines to issue, terminates, or refuses to renew a contract, or refuses to provide or continue a coverage or endorsement. Since underwriting rules can vary from insurer to insurer, a risk declined by one insurer s underwriting rules may be accepted by another insurer s underwriting rules. In theory, a risk would be placed in the residual market if it does not meet any insurer s underwriting rules. But some risks placed in the residual market may be eligible for insurance through the voluntary market. Example In Ontario, consumers are only required to have one declination letter from a voluntary market insurer before being eligible for coverage through the residual market. Study 15, page 5, under Sharing of Results add definition as follows: Definition Page 9 of 11

10 A car year is a measurement of an insurer s exposure. It means an automobile insured for a period of 12 months. For example, a single policy providing coverage on three automobiles for a six-month term would be 1.5 car years. Study 15, page 7, after the Servicing Carrier Compensation section add section as follows: Risk Sharing Pools The Facility Association also manages risk sharing pools in Alberta, New Brunswick, Nova Scotia, and Ontario, which are established under the Plan of Operation. These pools allow automobile insurance underwriters to transfer certain private passenger automobile exposures that may meet the companies underwriting guidelines, but still present higher-than-average risk. They are sometimes referred to as "grey" private passenger risks. Because these risks meet underwriting guidelines, insurers cannot decline them, and they must still be written in the voluntary market at the insurers normal rates. Risk sharing pools give the writing companies the option of keeping such business for their own account or transferring it to the pool. Only risks that do not meet underwriting guidelines can be considered residual market risks and have policies issued through the Facility Association. -Ontario Pool- The Ontario Risk Sharing Pool has operated since Insurers who are members of the pool cede the entire grey policies to the pool, but retain 15 percent of the premiums and claims. Insurers share the experience of the transferred risk with the pool in accordance with their share of the market and their usage of the pool. The company which issues the initial policy (the primary writer) remains responsible for servicing the policy, including settling any claims which may arise from the policy. -Two Alberta pools- Since 2004, two risk sharing pools have been operating in Alberta. One allows Alberta automobile insurers to transfer private passenger automobile exposures that are subject to the province s statutory maximum premium: This is called the Grid Pool. The other is called the Non-Grid Pool. It enables insurers to transfer any eligible private passenger automobile insurance exposures they underwrite, up to a predefined maximum amount. The types of risks transferred to the Non-Grid Pool would be grey risks similar to those transferred to the Ontario Risk Sharing Pool. The results of both these pools are shared by all private passenger automobile insurers in Alberta according to their market share (not including business submitted to the pools). -New Brunswick pool- In New Brunswick, the First Chance Risk Sharing Pool started operating in Underwriters in New Brunswick can transfer certain private passenger Page 10 of 11

11 automobile exposures that are eligible for the province s First-Chance discount into the pool. The results of the pool are shared in a similar manner to Alberta. -Nova Scotia pool- The Inexperienced Driver Risk Sharing Pool in Nova Scotia is designed to provide operators with less than six years driving experience and a clear driving record (no accidents or convictions) with affordable insurance on private passenger vehicles. It has been operating since Insurers in Alberta, New Brunswick, and Nova Scotia cede 100 percent of premiums and claims to their various pools, and share the results according to their market share (excluding business submitted to the pools). Nova Scotia has no limit for transferring business to the pool, but limits apply in New Brunswick and Alberta. All risk sharing pools have an expense allowance that varies by province. Study 16, replace study with the attached. Study 17, replace study with the attached. Page 11 of 11

12 Exhibit 1 1 COMPULSORY MINIMUM INSURANCE COVERAGE FOR PRIVATE PASSENGER VEHICLES All information in this appendix is current as of November 1, The following text has been condensed to fit into table format. For clarification and more detailed explanations, please refer to the sources listed at the end of this appendix. NEWFOUNDLAND & LABRADOR* NOVA SCOTIA NEW BRUNSWICK Compulsory minimum third-party liability: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000 $500,000 is available for any one accident $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000 Medical payments: (Optional) $25,000/person, including rehabilitation, excluding health insurance and other medical plans; time limit is four years $25,000/person, including rehabilitation, excluding health insurance and other medical plans; time limit is four years Funeral expense benefits: (Optional) $1,000 $1,000 $2,500 Disability income benefits: Death benefits: (Optional) 104 weeks partial disability; lifetime if totally disabled; maximum $140/ week; seven-day wait; unpaid housekeeper $70/week, maximum 12 weeks (Optional) Death within 180 days (or two years if continuously disabled prior to death); death of head of household $10,000, plus $1,000 to each dependent survivor after first; death of spouse $10,000; death of dependant $2, weeks partial disability; lifetime if totally disabled; maximum $140/week; sevenday wait; unpaid housekeeper $70/week, maximum 12 weeks Death within 180 days (or two years if continuously disabled prior to death); death of head of household $10,000, plus $1,000 to each dependent survivor after first; death of spouse/partner $10,000; death of dependant $2,000 Impairment benefits: N/A N/A N/A Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Yes, but awards are subject to $2,500 deductible Yes, but if injury a minor injury, maximum award is $2,500** Yes Yes Yes $50,000/person, including rehabilitation, excluding health insurance and other medical plans; time limit is four years 104 weeks partial disability; lifetime if totally disabled; maximum $250/week; sevenday wait; unpaid housekeeper $100/week, maximum 52 weeks Death within 180 days (or two years if continuously disabled prior to death); death of head of household $50,000, plus $1,000 to each dependent survivor after first; death of spouse/partner $25,000; death of dependant $5,000 Yes, but if injury a minor injury, maximum award is $2,500** Administration: Private insurers Private insurers Private insurers NOTES: Optional Section B benefits, which increase the accident benefits limits, can be purchased. The optional No Frills policy with lower limits was repealed on December 20, * Accident Benefits coverage is compulsory in all provinces except Newfoundland and Labrador. ** The maximum amount is currently being challenged in court. (2009 Facts reprinted with permission of Insurance Bureau of Canada) 13

13 PRINCE EDWARD ISLAND QUEBEC Compulsory minimum third-party liability: Medical payments: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 $25,000/person, including rehabilitation, excluding health insurance and other medical plans; time limit is four years Funeral expense benefits: $1,000 $4,599 $50,000; liability limits relate to property damage claims within Quebec and to personal injury and property damage claims outside Quebec No time or amount limit; includes rehabilitation Disability income benefits: Death benefits: 104 weeks partial disability; lifetime if totally disabled; maximum $140/week; seven-day wait; unpaid housekeeper $70/week, maximum 12 weeks Death within 180 days (or two years if continuously disabled prior to death); death of head of household $10,000, plus $1,000 to each dependent survivor after first; death of spouse $10,000; death of dependant $2,000 90% of net wages based on gross annual income of maximum $62,000/year, multiplied by a factor varying from 1 to 5, depending on age; seven-day wait; indexed Death anytime; depends on wage and age, $61,354 minimum, $310,000 maximum to spouse; dependent child based on age $29,141 53,686; if no surviving spouse/ dependants $49,175 to parents or estate Impairment benefits: N/A Scheduled up to $215,138 Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Yes, but if injury a minor injury, maximum award is $2,500* Yes No No Administration: Private insurers Bodily injury: government; property damage: private insurers NOTES: Lawsuits are not permitted with respect to injuries sustained in automobile accidents in Quebec. Victims and their dependants (if residents of Quebec) are compensated by their government insurer for their injuries whether or not the accident occurs in Quebec. Accident victims who do not reside in Quebec are entitled to compensation only to the extent that they are not responsible for the accident, unless otherwise agreed between the Société de l assurance automobile du Québec and authorities of the victims place of residence; additional compensation may be available from their own insurers. * The maximum amount is currently being challenged in court. (2009 Facts reprinted with permission of Insurance Bureau of Canada) 14

14 ONTARIO Compulsory minimum third-party liability: Medical payments: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 $100,000/person ($1 million if injury catastrophic ), including rehabilitation, excluding health insurance and other medical plans; attendant care $72,000 ($1 million if injury catastrophic ) Funeral expense benefits: $6,000 Disability income benefits: Income Replacement Benefit 80% of net wages up to $400/week, minimum $185/week; for 104 weeks maximum (longer if victim is unable to pursue any suitable occupation); capped at 12 weeks for Whiplash Associated Disorder I (WAD I) injuries and 16 weeks for WAD II injuries; seven-day wait Non-Earner Benefit (disabled unemployed persons, students enrolled in education full time, or students who completed their education less than one year before the accident and are not employed) $185/week for 104 weeks; 26-week wait; if student (as defined above) is still disabled after 104 weeks, Non-Earner Benefit is $320/week Death benefits: Death within 180 days (or three years if continuously disabled prior to death); $25,000* minimum to spouse; $10,000* to each surviving dependant; $10,000* to each parent/guardian Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: N/A Yes, if injury meets verbal threshold; subject to deductible. Lawsuit allowed only if injured person dies or sustains permanent and serious disfigurement and/or impairment of important physical, mental or psychological function. The court assesses damages and deducts $30,000 ($15,000 if Family Law Act claim) Yes. Injured person may sue for 80% of net income loss before trial, 100% of gross after trial; also for medical, rehabilitation and related costs when injury meets verbal threshold for pain and suffering claims Private insurers NOTES: Ontario insureds involved in accidents in Quebec can choose to receive, from their own insurer, the Ontario benefits or the equivalent to the benefits available to Quebec residents from the Société de l assurance automobile du Québec. Policyholders may purchase coverage for economic loss greater than the standard accident benefits. This coverage is referred to as the optional increased accident benefits. *The amounts provided under funeral and death benefits can vary with the Consumer Price Index (CPI), if the indexation optional benefit is purchased within the auto insurance policy. The indexed amount will vary depending on when the accident occurred. Compulsory minimum third-party liability: MANITOBA $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000 SASKATCHEWAN $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 If no-fault option selected: If tort option selected: Medical payments: No time or amount limit; includes rehabilitation Up to $5,937,049/person; includes rehabilitation Up to $23,210/person for noncatastrophic, up to $174,107 for catastrophic injury Funeral expense benefits: $7,422 $8,906 $5,804 Disability income benefits: Maximum/year $76,000 90% of net wages based on gross annual income of maximum $71,186/year; seven-day wait; indexed Up to $18,200/year if totally disabled; $8,788/year for partial disability for up to two years; indexed 15 (2009 Facts reprinted with permission of Insurance Bureau of Canada)

15 Continued MANITOBA SASKATCHEWAN Death benefits: Death anytime, benefits depend on wage and age of deceased; partner gets minimum $54,466, maximum $380,000; disabled dependants $23,828; non-dependent child or parent $12,128 If no-fault option selected: 45% of deceased s net income; minimum $61,250 to spouse; 5% of calculated death benefits to each dependent child; if no spouse, $13,163 to each surviving parent or child older than age 21, to a maximum $61,250; up to $40,833 spouse education benefit; death of dependent child $27,221 Impairment benefits: Up to $215,000 Up to $170,134/person for non-catastrophic, up to $207,797 for catastrophic injury Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: If tort option selected: 45% of deceased s net income; minimum $52,232 to spouse; 5% of calculated death benefits to each dependent child; if no spouse or dependant, up to $11,607 to estate Up to $11,606/person for noncatastrophic, up to $150,893 for catastrophic injury No No Yes, subject to deductible of $5,000 No Government (government and private insurers compete for optional and excess coverage) Yes. Injured persons may sue for economic losses that exceed no-fault benefits. However, award above nofault benefit based on net income after deductions for income tax, Canada Pension Plan and employment insurance Government (government and private insurers compete for optional and excess coverage) Yes. Any benefit amounts received from other insurance plans to be deducted from the court award or settlement Government (government and private insurers compete for optional and excess coverage) NOTES: Residents of Manitoba involved in accidents in Quebec can receive from their own insurer the equivalent to the benefits available to Quebec residents from the Société de l assurance automobile du Québec. First-party all perils* insurance is compulsory in Manitoba (deductibles vary according to type of vehicle). Policyholders may purchase coverage for economic loss greater than maximum accident benefits. Lawsuits are not permitted with respect to injuries sustained in automobile accidents in Manitoba. Victims and their dependants who reside in Manitoba are compensated by the government insurer for their injuries whether or not the accident occurs in Manitoba. Saskatchewan is a no-fault province where residents can opt out of the Personal Injury Protection Plan (PIPP), or nofault, in favour of a tort plan. First-party all perils* insurance is compulsory in Saskatchewan (deductibles vary according to type of vehicle). 16 * Collision and comprehensive insurance for the policyholder s vehicle (2009 Facts reprinted with permission of Insurance Bureau of Canada)

16 ALBERTA Compulsory minimum third-party liability: Medical payments: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 $50,000/person; including rehabilitation, excluding health insurance and other medical plans; chiropractic maximum $750; massage therapy $250; acupuncture $250; all limits are per person, per accident; limit is two years Funeral expense benefits: $5,000 Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: NOTES: 80% gross weekly wages up to maximum $400/week; 104 weeks total disability; seven-day wait; non-earner benefit (unemployed person 18 years or older) $135/week, for maximum of 26 weeks Death anytime; death of head of household $10,000, plus 20% ($2,000) to each dependent survivor after first; plus survivor spouse/partner or dependent relative gets $15,000 for the first survivor and $4,000 for each remaining survivor; death of spouse/partner $10,000; death of dependent relative according to age, maximum $3,000 N/A Yes. Maximum amount recoverable as damages for the non-pecuniary loss for all minor personal injuries $4,504 ( minor means sprains, strains and Whiplash Associated Disorder WAD I and II) Yes Private insurers Alberta residents involved in accidents in Quebec can receive from their own insurer the equivalent to the benefits available to Quebec residents from the Société de l assurance automobile du Québec. Similar arrangements are in place for accidents involving Alberta residents in Saskatchewan and Manitoba. (2009 Facts reprinted with permission of Insurance Bureau of Canada) 17

17 Ontario Application for Automobile Insurance Owner s Form (OAF 1) This is your Application for Automobile Insurance. - Check it carefully and notify your Broker/Agent of any errors or of any changes in the future. - Retain this document for your Records. Some of the terms used in this application are explained further below. Insurance Company Broker/Agent Insurance Coverages Applied For Ontario motorists must have the following standard coverages: Liability, Accident Benefits, Uninsured Automobile and Direct Compensation Property Damage. You may also purchase additional insurance for Loss or Damage to the automobile and Optional Increased Accident Benefits. This is a brief explanation of the insurance coverages available to you. For complete details consult your policy. Your Insurer will supply you with a copy of the policy if you request it. Liability - Provides coverage for you or other insured persons if someone else is killed or injured or their property is damaged in an automobile incident. It will pay for legitimate claims against you or other insured persons up to the limit of your coverage, and the cost of settling claims. Accident Benefits - Your insurance company is obligated to explain details of Accident Benefits coverage to you. Provides benefits that you and other insured persons may be entitled to receive if injured or killed in an automobile accident. These benefits include: income replacement for persons who have lost income; payments to non-earners who suffer complete inability to carry on a normal life; payment of care expenses to persons who cannot continue to act as a primary caregiver for a member of their household; payment of medical, rehabilitation and attendant care expenses; payment of certain other expenses; payment of funeral expenses; and payments to survivors of a person who is killed. You may also purchase optional benefits to increase the standard level of benefits provided in your policy. The optional benefits your insurance company must offer are: Increased Income Replacement the standard level of income replacement provided in the policy ($400 per week maximum) may be increased by purchasing optional coverage so that the weekly limit is up to $600, $800 or $1,000. All income replacement benefits are based on 70% of your gross weekly income. Caregiver, Housekeeping and Home Maintenance Expenses The standard caregiver, housekeeping and home maintenance expenses benefit is available only for a person who is catastrophically impaired. You may purchase an optional benefit to provide this coverage for all impairments. Increased Medical, Rehabilitation and Attendant Care the standard benefit pays up to $50,000 for medical and rehabilitation expenses, with a 10 year time limit in most cases, and up to $36,000 for attendant care expenses. If catastrophically impaired, the standard benefit pays up to $1,000,000 for medical and rehabilitation expenses and up to $1,000,000 for attendant care expenses. You may purchase an optional medical and rehabilitation benefit of $100,000; optional attendant care benefit of $72,000; or an optional medical, rehabilitation and attendant care benefit of $1,100,000 for medical and rehabilitation expenses and $1,072,000 for attendant care expenses. Increased Death and Funeral the standard level of death benefits paid to the surviving spouse and dependant of a person who is killed ($25,000 to surviving spouse; $10,000 to surviving dependant) may be doubled by purchasing this optional coverage. This coverage also increases the standard funeral expense benefit from $6,000 to $8,000. Dependant Care There is no standard dependant care benefit for persons who are employed and care for dependants. You may purchase an optional benefit to receive weekly dependant care expenses of $75 for the first dependant, and $25 for each additional dependant, up to $150 per week. Indexation Benefit this optional coverage will ensure that certain weekly benefit payments and monetary limits will be adjusted on an annual basis to reflect changes in the cost of living. Uninsured Automobile Provides coverage if you or other insured persons are injured or killed by an uninsured motorist or by a hit-and-run driver. It covers damage to your automobile and its contents caused by an identified, uninsured motorist, subject to a $300 deductible. Direct Compensation Property Damage Provides coverage in Ontario, under certain conditions, for damage to your automobile and to property it is carrying, when another motorist is responsible. It is called Direct Compensation because you will collect from us, your insurance company, even though you are not at fault for the accident. There may be a deductible amount, and this amount is either paid by you toward the cost of repairs or is deducted from the loss settlement. Higher deductibles may reduce your premium. Loss or Damage Provides a selection of optional coverages for your own automobile. Payments cover direct and accidental loss of, or damage to, a described automobile and its equipment. There is usually a deductible amount indicated for each coverage and this amount is either paid by you toward the cost of repairs or is deducted from the loss settlement. Higher deductibles may reduce your premium. There are four types of coverages: Specified Perils: Covers the described automobile against loss or damage caused by certain specific perils. They are: fire; theft or attempted theft; lightning, windstorm, hail or rising water; earthquake; explosion; riot or civil disturbance; falling or forced landing of aircraft or parts of aircraft; or the stranding, sinking, burning, derailment or collision of any kind of transport in, or upon which, the described automobile is being transported. Comprehensive: Covers a described automobile against loss or damage other than those covered by Collision or Upset, including perils listed under Specified Perils, falling or flying objects, missiles and vandalism. Collision or Upset: Covers damage when a described automobile is involved in a collision with another object or tips over. All Perils: Combines the Collision or Upset and Comprehensive coverages. For purposes of the Insurance Companies Act (Canada), this document was issued in the course of the insurance company s insurance business in Canada. (Reprinted with permission from FSCO) Effective ( ) FSCO (1213E) OAF 1 Page 1 of 4

18 Ontario Application for Automobile Insurance Owner's Form (OAF 1) Policy No. Assigned New policy Replacing Policy No. Company bill Broker/Agent bill Other (specify) Language Preferred English French Insurance Company (Insurer) Broker/Agent 1 Applicant's Name & Postal Address Lessor (if applicable) Name and Address Name and Address Broker Code: Postal Code Postal Code Phone No. Home ( ) Work ( ) Phone No. ( ) Fax ( ) 2 Policy Period (all times are local times at the applicant's address shown above) Effective Year Month Day Time: a.m. Expiry Date: Date: Year Month Day Time:: p.m. 3 Described Automobile - Each automobile will be used primarily in the vicinity of the applicant's address, unless otherwise stated in Remarks. Auto No. Model Year Make or Trade Name Model Body Type No. of Cylinders or Engine Size at 12:01 a.m. Gross Vehicle Weight Rating [ ] Lbs [ ] Kg Auto No Vehicle Identification No. (Serial No.) Owned? Leased? Purchased/Leased Year Month New? Used? Purchase Price (including options & taxes) Automobile Use (*Give details in Remarks section) Commute Pleasure One - Way Business* Farm Comm ercial* 1. km 2. km 3. km Auto No. Estimated Annual Driving Distance Is any automobile used for car pooling? If Yes, give no. of Passengers and Details Modified/Customized Type of Fuel Used Unrepaired Damage? (See Note 1) Gas Diesel If other, give details: (If Yes, give details in Remarks section) 1. km Yes No Yes No Yes No 2. km Yes No Yes No Yes No 3. km Yes No Yes No Yes No Auto No. Lienholder Name & Postal Address Is the applicant both the Registered Owner and the Actual Owner of the described automobile(s)? Yes No If No, give details in Remarks section. Will any of the described automobiles be rented or leased to others, or used to carry passengers for compensation or hire, or haul a trailer, or carry explosives or radioactive material? Yes No Total number of automobiles in the household or business. 4 Driver Information List all drivers of the described automobile(s) in the household or business. Date of Birth Driver Name as shown on Driver's Licence Driver's Licence Number No. Year Month Day Sex Marital Status Driver No. Driver Training Certificate Attached? Date First Licensed in Canada or U.S. Other class of licence, if any Percentage Use by Each Driver (Class G or equivalent) Class Year Month Class Year Month Auto. 1 Auto. 2 Auto. 3 Are any other persons in the household or business licensed to drive? Do any drivers qualify for Retiree Discount? (See Note 2) 1. Yes No Yes No 2. Yes No Yes No Yes No 3. Yes No If yes, provide complete Yes No details in the Remarks section. 4. Yes No Yes No Special Notes: Note 1: Modified/customized includes changes, other than repairs or restorations that affect the original manufacturer s design specifications or increase the value of the automobile. These may include, but are not limited to: engine modifications; paint changes; non-factory installed wheels, tires and electronic accessories and equipment, etc. If you are insured for "Loss or Damage Coverage", there is a $1500 limit on non-factory installed electronic accessories and equipment. Note 2: Retiree Discount You may be entitled to a discount if you are the principal operator of a described automobile, are retired, have not been employed for 26 weeks or more in the last 52 weeks, do not earn or receive income from any office or employment, are not engaged in any professional occupation and are not operating a business. To qualify, you must be at least age 65, or receiving a pension under the Canada Pension Plan, the Quebec Pension Plan, or a pension registered under the Income Tax Act. If you qualify, your broker or agent will ask you to sign a declaration to confirm this. If a driver is licensed less than 6 years in Canada, driving experience in other countries may be recognized. Attach proof of other licensing and insurance. What are the details of the applicant's most recent automobile insurance? Insurance Company Policy No. Expiry Date Year Month Day To the applicant's knowledge... Has any driver's licence, vehicle permit etc, issued to the applicant or to any person in the household or business been suspended or cancelled in the last 6 years? Yes No If Yes, give details in Remarks section. Has any insurance company cancelled automobile insurance for the applicant or any listed driver in the last 3 years? Yes No If Yes, give details in Remarks section. During the last 3 years, has any automobile insurance policy issued to the applicant or any listed driver been cancelled or has any claim been denied for material misrepresentation? Yes No If Yes, give details in Remarks section. Has the applicant or any listed driver been found by a court to have committed a fraud connected with automobile insurance? Yes No If Yes, give details in Remarks section. Effective ( ) FSCO (1213E) (Reprinted with permission from FSCO) OAF 1 Page 2 of 4

19 5 Previous Accidents and Insurance Claims Give details of all accidents or claims arising from the ownership, use or operation of any automobile by the applicant or any listed driver during the last 6 years. The coverages are: BI - Bodily Injury, PD - Property Damage, AB - Accident Benefits, DCPD - Direct Compensation - Property Damage, UA - Uninsured Automobile, Coll- Collision, AP - All Perils, Comp - Comprehensive, SP - Specified Perils Driver No. Auto Date Coverage Claim Paid Under Amount Paid or Estimate Details (Use Remarks section if necessary) Month AB DCPD UA No Year Day BI PD Coll/AP Comp/SP 6 History of Convictions Give details of all convictions of the applicant and any listed driver arising from the operation of any automobile in the last 3 years. Driver Date Convicted Driver Date Convicted Details (Use Remarks section if necessary) No. Year Month Day No Year Month Day Details (Use Remarks section if necessary) 7 Rating Information AGENT/BROKER AND COMPANY USE ONLY Auto Driving Record Driver No. At-Fault Claim Surcharges Conviction Surcharges Class No. BI PD AB DCPD Coll/AP Princ. Sec. Description % Description % Auto No. List Price New Vehicle Code Rate Group AB DCPD Coll/AP Comp/SP Location Territory Discounts Description and Percentage Insurance Coverages Applied For Read Page 1 of this form before completing this section. Automobile 1 Automobile 2 Automobile 3 Liability Limit (000s) Premium Limit (000s) Premium Limit (000s) Premium Bodily Injury Occasional Driver Premium Property Damage Accident Benefits (Standard Benefits) Optional Increased Accident Benefits ( ) Coverage Required Income Replacement ($600/$800/$1,000) Caregiver, Housekeeping & Home Maintenance (up to $ per week) As stated in Section 4 of Policy (up to $ per week) As stated in Section 4 of Policy (up to $ per week) As stated in Section 4 of Policy Medical and Rehabilitation ($100,000) Attendant Care ($72,000) Medical, Rehabilitation ($1,100,000) & Attendant Care ($1,072,000) Death & Funeral Dependant Care Indexation Benefit (Consumer Price Index) Uninsured Automobile Direct Compensation-Property Damage This policy contains a partial payment of recovery clause for property damage if a deductible is specified for Direct Compensation-Property Damage. As stated in Section 5 of Policy As stated in Section 5 of Policy As stated in Section 5 of Policy Deductible Deductible Deductible Loss or Damage* Deductible Premium Deductible Premium Deductible Premium Premium Specified Perils (excluding Collision or Upset) Comprehensive (excluding Collision or Upset) Collision or Upset All Perils * This policy contains a partial payment of loss clause. A deductible applies for each claim except as stated in your policy. Policy Change Forms (Name & No.) Deductible/Limit Premium Deductible/Limit Premium Deductible/Limit Premium Premium Family Protection Coverage -OPCF 44R Yes No LIMIT SAME AS LIABILITY UNLESS OTHERWISE NOTED LIMIT SAME AS LIABILITY UNLESS OTHERWISE NOTED LIMIT SAME AS LIABILITY UNLESS OTHERWISE NOTED Total Premium Per Automobile (Reprinted with permission from FSCO) Effective ( ) FSCO (1213E) OAF 1 Page 3 of 4

20 9 Remarks - Use this space if you have further details 10 Method of Payment Extra sheets attached. Type of Payment Plan Estimated Policy Premium** Provincial Sales Tax Interest Total Estimated Cost Amt. Paid with Application Amount Still Due No. of Remaining Instalments Amount of Each Instalment Instalment Due Date Y M D ** This policy premium is estimated and subject to adjustment or confirmation by the insurer. If we issue a policy and the applicant cancels it, there may be a minimum premium shown on your Certificate of Automobile Insurance that will not be refunded. 11 Declaration of Applicant Read this section carefully before you sign. I understand that to qualify for a driver s licence, drivers: must not suffer from any mental, emotional, nervous or physical disability that significantly interferes with the driver's ability to safely drive an automobile of the class they are licensed for; must not be addicted to alcohol or a drug to the extent that it significantly interferes with the driver's ability to safely drive an automobile; and must notify the Ministry of Transportation immediately if the driver becomes physically or mentally disabled to the extent that it might interfere with the driver's ability to safely drive an automobile. To the best of my knowledge, all listed drivers are qualified and hold a driver s licence, and the details in Sections 1 to 6 and 9 are correct. Inspection: My Insurer may require my automobile to be inspected. If I do not co-operate with any reasonable arrangements to inspect my automobile, I understand my optional loss or damage coverages under Section 7 may be cancelled, and any claims under that section may be denied. Warning - The Insurance Act provides that where: (a) an Applicant for a contract, (i) gives false particulars of the described automobile to be insured to the prejudice of the Insurer, or (ii) knowingly misrepresents or fails to disclose in the application any fact required to be stated therein; or (b) the Insured contravenes a term of the contract or commits a fraud; or (c) the Insured wilfully makes a false statement in respect of a claim under the contract, a claim by the Insured, for other than such statutory accident benefits as are set out in the Statutory Accident Benefits Schedule, is invalid and the right of the Insured to recover indemnity is forfeited. Warning Offences It is an offence under the Insurance Act to knowingly make a false or misleading statement or representation to an Insurer in connection with the person s entitlement to a benefit under contract of insurance, or to wilfully fail to inform the Insurer of a material change in circumstances within 14 days, in connection with such entitlement. The offence is punishable on conviction by a maximum fine of $100,000 for the first offence and a maximum fine of $200,000 for any subsequent conviction. It is an offence under the federal Criminal Code for anyone to knowingly make or use a false document with the intent it be acted on as genuine and the offence is punishable, on conviction, by a maximum of 10 years imprisonment. It is an offence under the federal Criminal Code for anyone, by deceit, falsehood or other dishonest act, to defraud or to attempt to defraud an insurance company. The offence is punishable, on conviction, by a maximum of 10 years imprisonment for fraud involving an amount over $5,000 or otherwise a maximum of 2 years imprisonment. Consent I am applying for automobile insurance based on the information provided above. With respect to this application or any renewal or change in coverage, I authorize you to collect, use and disclose my driving record, auto insurance history and auto claims history, and those of the listed drivers from whom I declare I have obtained consent for these purposes, as permitted by law for the limited purposes necessary to assess the risk, investigate and settle claims, and detect and prevent fraud. Applicant's Signature Date 12 Report of Broker/Agent Have you bound this risk? Is this business new to you? Yes No Yes No Type of Motor Vehicle Liability Insurance Card issued Temp Perm None How long have you known the Applicant? How long have you known the Principal Driver? Has an inspection been completed? Yes No Broker/Agent Signature Date The Applicant must receive a copy of the signed application. A supplementary form for commercial or public use automobiles may be necessary. (Reprinted with permission from FSCO) Effective ( ) FSCO (1213E) OAF 1 Page 4 of 4

21 5 Liability Coverage; Direct Compensation Property Damage (Sections 3 and 6) Learning Objectives When you finish this study, you should be able to meet the following objectives: Discuss the legal basis for liability arising from the ownership, use, or operation of an automobile. Under the liability section of the policy: Identify the individuals who will be indemnified. State the coverage provided. Explain the reason for each of the exclusions. Explain how Direct Compensation for Property Damage works. State the types of injury claims that could be expected under the Liability section of the automobile policy. Summarize the additional agreements of insurer. State the responsibilities of insured persons. State the agreements of the insured. Define priorities of payment. 1

22 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Contents Introduction Liability Coverage Exclusions Liability for Property Damage Direct Compensation Property Damage Deductible Liability for Injury Claims Additional Agreements of Insurer Responsibilities of Insured Persons Agreements of the Insured Policy Limits Priorities of Payment WNE 2

23 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE Introduction Named insured should be the registered owner An automobile policy (OAP 1) is purchased by the registered owner of the automobile. He or she has an insurable interest in that automobile. The owner is the named insured. That is why the OAP1 is also known as the Owner s Policy. The owner s name appears on the policy and should appear on the ownership documents (vehicle registration). If the two are not the same, there is already a problem. The policy defines various classes of persons as insured persons as well. These definitions vary from one part of the policy to another. In the next few studies we will be studying the Owner s Policy in modules in the following sequence: Liability Coverage (Sections 3 and 6) Accident Benefits (Section 4) Loss or Damage Coverages (Section 7) Uninsured Automobile Coverage (Section 5) General Provisions, Definitions, and Exclusions (Section 2) Statutory Conditions (Section 8) Endorsements Liability Coverage Legal liability protection Liability coverage is designed to provide financial protection for the insured s legal liability for injury to other people (Bodily Injury) and damage to the property of others (Property Damage) arising out of the ownership or directly or indirectly from the use or operation of the automobile. Negligence Legal liability to others can arise from the use or operation of the automobile owned and described in the policy or the use or operation of certain other automobiles by the named insured or persons insured as defined in the policy. To be legally liable for injuries or damage to other persons, the driver or owner must either have deliberately caused the injury or damage or be considered negligent to some degree. An individual s legal liability as a motorist is stated in the Highway Traffic Act 1. This can be modified by other legislation and regulations as is the case with bodily injuries resulting from automobile accidents. 1 See earlier discussion on negligence. 3

24 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Section 239 of the Insurance Act states: (1) Subject to section 240 2, every contract evidenced by an owner s policy insures the person named therein, and every other person who with the named person s consent drives, or is an occupant of, an automobile owned by the insured named in the contract and within the description or definition thereof in the contract, against liability imposed by law upon the insured named in the contract or that other person for loss or damage Who is insured and when (a) arising from the ownership or directly or indirectly from the use or operation of any such automobile; and (b) resulting from bodily injury to or the death of any person and damage to property. The above section of the Act tells us who is insured by an automobile policy and under what general circumstances. The possibilities of being involved in an accident, and being found negligent and therefore responsible to third parties, are increasing constantly. They are mainly caused by: The greater numbers of cars and drivers The continual increase in the number of accidents Need for adequate insurance The need for an adequate amount of insurance is emphasized by the amounts of claim settlements and court judgments. Average cost of injury and property damage is constantly increasing. In Canada there are more and more awards in the millions of dollars while in the United States these amounts have been even higher. The responsible broker or agent will encourage clients to purchase adequate Liability insurance. To do otherwise, exposes them to possible financial ruin. Minimum limits are compulsory in all provinces but do not necessarily provide adequate coverage. Exclusions Types of losses not covered Certain types of losses are not covered by this section of the policy: Claims for damage to property carried in or upon the automobile, or claims for damage to other property owned or rented by, or in the care, custody, or control of the named insured or other insured persons. Claims arising from contamination of property carried in the automobile. 2 Refers to excluded drivers 4

25 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE This last exclusion was added in 1970 in Ontario, and subsequently in other jurisdictions, as a result of an incident in which a load of gasoline became contaminated by the previous cargo, due to improper cleaning of the tank between loads. The contaminated gasoline was distributed to a service station and a large number of vehicles developed engine problems as a result. The automobile policy on the tank truck paid the claim. The general consensus, however, was that the automobile policy was not intended to cover this type of claim, and so this exclusion was added to prevent similar claims in the future. Nuclear energy hazards means radioactive, toxic, explosive, or other hazardous properties of substances described in Regulations made under the Atomic Energy Control Act (Canada). If the named insured or other insured persons are involved in an incident where the loss or damage is directly or indirectly caused by a nuclear hazard, the policy will pay up to $200,000 if the named insured or other insured persons are covered under this policy for a nuclear hazard and are also insured under a nuclear energy hazard liability policy. The automobile policy provides excess coverage and will only pay after the limits of the nuclear energy hazard liability policy have been exhausted. There is no coverage under the automobile policy if the insured does not also have a nuclear energy hazard liability policy. Section of the policy also clearly states that the policy will not cover amounts in excess of the limit purchased, other than legal costs and postjudgment interest. Summary There is no coverage for: The insured s own property or property for which he or she is responsible while being carried in the automobile Contamination of property being carried Nuclear hazards, unless the insured also has a nuclear energy hazard liability policy, and then only as excess insurance Amounts over the policy limit purchased 5

26 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Liability for Property Damage Under tort law, when you are negligent and found responsible for damage to someone else s automobile, that third party looks to you or your insurer for recovery. That is why you need Liability insurance. When someone else is responsible for damaging your automobile, you expect to recover from him or her to the extent of his or her liability. Ontario introduced direct compensation for vehicle damage in June 1990, while similar direct compensation for vehicle damage came into effect in New Brunswick in January Although liability must still be established, insureds recover from their own insurers under a direct compensation scheme. Direct Compensation Property Damage (DCPD) Only deal with own insurer It is important to understand clearly the change created in the handling of claims for damage to vehicles brought about by Section 263 of the Insurance Act. Insureds now deal only with their own insurers and cannot claim against third parties or their insurance companies. Their own insurers will indemnify them for the cost of repairs as well as for damage to contents carried in the vehicle and its loss of use subject to the extent they are not at fault. Further, Section 263 will apply even if there is a breach of a policy condition (as decided by the Ontario Divisional Court in Aube v. Royal Insurance (1998)). Note that a claim could be made under this section even though the other driver has not directly struck the insured vehicle. The other driver could indirectly force the insured off the road causing damage to the vehicle. The other driver would have to be identified and insured, and proven negligent in indirectly causing our insured s single vehicle accident. Many people believe that DCPD is a no-fault system but in fact this is a misunderstanding DCPD is not no-fault. You can only claim against the DCPD section of the policy to the extent that you are not at fault. This means that if, for example, you are 100% at fault, you cannot claim anything under the DCPD section whilst a true no-fault system would allow you to claim against that section without taking into account whether you are at fault or not. The Accident Benefits section of the OAP1 is an example of a no-fault system. Let us once again look at the Insurance Act. Section 263 (1) This section applies if, (a) an automobile or its contents, or both, suffers damage arising directly or indirectly from the use or operation in Ontario of one or more other automobiles; 6

27 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE (b) the automobile that suffers the damage or in respect of which the contents suffer damage is insured under a contract evidenced by a motor vehicle liability policy issued by an insurer that is licensed to undertake automobile insurance in Ontario or that has filed with the Superintendent, in the form provided by the Superintendent, an undertaking to be bound by this section; and (c) at least one other automobile involved in the accident is insured under a contract evidenced by a motor vehicle liability policy issued by an insurer that is licensed to undertake automobile insurance in Ontario or that has filed. Jurisdiction of DCPD Recovery from own insurer Insured s rights unchanged Fault chart approach Direct Compensation applies if damage occurs in Ontario and both vehicles are insured under automobile policies issued by licensed insurers in Ontario or insurers from outside Ontario, who have signed agreements to be bound by this section. The insured is then entitled to recover for the damages to his or her automobile and its contents and for its loss of use from the insured s own insurer as though the insured were a third party. (2) If this section applies, an insured is entitled to recover for the damages to the insured s automobile and its contents and for loss of use from the insured s insurer under the coverage described in subsection 239 (1) as though the insured were a third party. (3) Recovery under subsection (2) shall be based on the degree of fault of the insurer s insured as determined under the fault determination rules. This section does not give rights greater than a third party would have if the insured still had the right to recover from the third party. Under normal tort law the third party would only recover to the extent of being not at fault, for example, 100 percent not at fault, 50 percent, 25 percent, and so on. This same right of recovery is now to be exercised against the insured s own insurer when direct compensation applies. In Ontario, the use of Fault Determination Rules is similar to Quebec s Fault Chart approach to automobile physical damage. The Regulations pursuant to the Insurance Act contain a section entitled Fault Determination Rules. Following is one example: Fault Determination Rule No. 7 (1) This section applies when automobile A collides with automobile B while automobile B is entering a road from a parking place, private road or driveway. 7

28 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) (2) If the incident occurs when automobile B is leaving a parking place and automobile A is passing the parking place, the driver of automobile A is not at fault and the driver of automobile B is 100 per cent at fault for the incident. (3) If the incident occurs when automobile B is entering a road from a private road or driveway and automobile A is passing the private road or driveway and, if there are no traffic signals or signs, the driver of automobile A is not at fault and the driver of automobile B is 100 per cent at fault for the incident. Dispute resolution Sue own insurer (4) An insured may bring an action against the insurer if the insured is not satisfied that the degree of fault established under the fault determination rules accurately reflects the actual degree of fault or the insured is not satisfied with a proposed settlement and the matters in issue shall be determined in accordance with the ordinary rules of law. Provision is made that an insured can still sue if unsatisfied with the degree of fault and/or the settlement, but such action would be against the insured s insurer, not the third party insurer. The insured would have to present evidence that there were extenuating circumstances that made his or her situation different than the circumstances described by the rule applied. 8

29 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE Recovery restrictions If no DCPD agreement (5) If this section applies (a) an insured has no right of action against any person involved in the incident other than the insured s insurer for damages to the insured s automobile or its contents or for loss of use: (a.1)an insured has no right of action against a person under an agreement, other than a contract of automobile insurance, in respect of damages to the insured s automobile or its contents or loss of use, except to the extent that the person is at fault or negligent in respect of those damages or that loss. (b) an insurer, except as permitted by the regulations, has no right of indemnification from or subrogation against any person for payments made to its insured under this section. The insured is prevented from suing any other person involved in the accident for such damage or loss of use unless the negligent party is insured with an insurer outside the province of Ontario and that insurer is not a subscriber to the DCPD agreement. An example may be an American tourist insured with the Indiana Mutual Insurance Company. Otherwise, the insurer which pays the claim cannot subrogate against other insurer(s) who are signatories to the DCPD agreement except as permitted by the regulations. Section 6 of Regulation 664 states: (1) For the purpose of clause 263 (5)(b) of the Act, the insurer of an automobile that is in the care, custody or control of a person who is engaged in the business of selling, repairing, maintaining, servicing, storing or parking automobiles is entitled to indemnification from the person. (2) The amount of the indemnity is limited to that proportion of the loss that is attributable to the fault, as determined under the fault determination rules. Automobile businesses When someone who is in a business relating to automobiles is negligent and damage to an insured automobile results, the insurer may subrogate against that responsible party. Section 7 of Regulation 664 states: (1) For the purpose of clause 263 (5)(b) of the Act, the insurer of an automobile that is being towed by another automobile is entitled to indemnification from the lessee or, if there is no lessee, from the owner of the automobile towing it, (a) if the lessee or owner is engaged in the business of towing automobiles; or (b) if the automobile towing the insured automobile has a gross vehicle weight greater than 4,500 kilograms. 9

30 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) (2) The amount of the indemnity is limited to that proportion of the loss that is attributable to the fault, as determined under the fault determination rules, of the driver of the automobile that is towing the insured automobile. Towing This is similar to Section 6 but deals with damage that occurs when an automobile is being towed. If the tower is negligent, the insurer of that automobile may subrogate for the attributable portion under the fault rules. Section 8 of Regulation 664 states: (1) For the purpose of clause 263 (5)(b) of the Act, the insurer of an automobile the contents of which suffer damage in an amount greater than $20,000 is entitled to indemnification from the insurer of the other automobile involved in the incident. (2) The amount of the indemnity is limited to that proportion of the loss over $20,000 that is attributable to the fault, as determined under the fault determination rules, of the driver of the other automobile. Contents losses If a contents loss is over $20,000, an insurer may recover from the insurer of the at-fault party the amount that is over $20,000. It will be apportioned according to the fault rules. There must be at least two automobiles, insured by an Ontario automobile policy, involved before direct compensation rules take effect. When a loss occurs involving an automobile and other property such as a building or a bridge, the fault determination rules do not apply. The ordinary rules of tort will apply. Own damage cover such as Collision or Comprehensive is not affected by these direct compensation provisions. To the extent that insureds are at fault, they can recover from their own insurer, subject to their deductible, provided they have purchased such cover, otherwise they have no source of recovery. Example1 Tom Thomas buys the following coverage from insurer XYZ: Liability - $500,000 Accident Benefits Collision with $500 deductible Comprehensive with $50 deductible Direct Compensation with no deductible An accident occurs with Nancy Wong who is insured with insurer ABC. The Fault Determination Rules indicate that Thomas is 100% not at fault. Damage is set at $5,000 plus $200 car rental for loss of use. Thomas recovers all of the loss from insurer XYZ. They pay the claim and close the file; they cannot subrogate. 10

31 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE Example 2 The same set of circumstances exists as in Example 1, but the Fault Determination Rules show each operator was equally liable, that is, 50%/ 50%. Thomas recovers his loss as follows Damage to the vehicle Paid by insurer XYZ under Direct Compensation $2,500 ($5,000 x 50% since he was 50% at fault) Paid by insurer XYZ under Collision coverage $2,250 ($5,000 x 50% less 50% of his $500 deductible) Loss of Use Paid by insurer XYZ under Direct Compensation $100 ($200 x 50% since he was 50% at fault) Total recovery $4,850 The other half of the Loss of Use loss is not recoverable unless Thomas has bought the Loss of Use (Transportation Replacement) endorsement which is not a compulsory coverage. Wong can also recover her loss from ABC. She would receive 50% of her loss under her Direct Compensation coverage and the remaining 50% under Collision subject to her deductible, if she had purchased this coverage. Deductible Physical damage deductible In Ontario all physical damage claims, i.e., Collision, Comprehensive, and All Perils coverage as well as Direct Compensation Property Damage are subject to a standard deductible of $500. There is provision to reduce or eliminate this deductible on any or all coverages. The standard deductible under DCPD coverage is $500, but an insured can select a higher or lower deductible amount. In the previous examples, if endorsements were not purchased, recoveries under DCPD would be as follows: Examples 1. Full loss ($5,000 plus $200) less $500 deductible = $4, % of $5,200 less 50% of $500 (deductible) = $2,350. Recovery under his own collision cover remains unchanged. 11

32 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Summary The above examples demonstrate that if the DCPD deductible is $0 the insureds recover exactly the same as they would have recovered under tort prior to the introduction of Direct Compensation, the only difference being that the recovery is made from their own insurer, and not the third party insurer, to the extent they are innocent (not at fault) in the accident. The Fault Determination Rules apply only to vehicle-to-vehicle damage, not to other damage such as collision with a building, or bridge, or tree where traditional liability law applies, nor to injuries for which you must refer to other sections of this course. The provision for direct compensation for contents of an automobile does not apply to contents being carried for reward. It appears that cargo insurance for public truckers continues to be needed. Liability for Injury Claims OMPP Threshold Bill 164 Bill 59 & 198 Under the Ontario Motorist Protection Plan (OMPP) the right to sue a third party in the event of injury was severely curtailed by limiting it to certain non pecuniary losses. Claimants had to establish that their injury met the severity threshold. The determination of whether the threshold was met could be decided by a judge on a motion before trial or at the trial. The threshold which defined the conditions under which a person could sue was introduced in June It provided that suits could only be initiated if the injured person died or sustained permanent serious disfigurement or permanent serious impairment of an important bodily function caused by continuing injury which is physical in nature. Note that any psychological or mental impairment was not considered a criterion under the OMPP when determining if the injured party would be allowed to sue for damages. Effective January 1, 1994, Bill 164 introduced the Statutory Accident Benefits (SABS) and amended the threshold definition to allow suits on the grounds of death or serious disfigurement or serious impairment of an important physical, mental or psychological function. A deductible of $10,000 was applied to the amount of damages recoverable. Note that under this Bill psychological and mental impairments were added to the threshold definition but the requirement that injuries or impairments be permanent was taken out of the definition. Under Bill 59 in 1996 and Bill 198 in 2003, the threshold definition was again revised. This time it allowed suits on the grounds of death or permanent serious disfigurement or permanent serious impairment of an important physical, mental or psychological function. 12

33 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE Sept 1, 2010 With the passage of the New Statutory Accident Benefits Schedule, effective September 1, 2010 new provisions have been added to the Insurance Act and the Regulations to deal with these changes. Note that under the current legislation (as well as the previous two bills Bill59 and Bill 198), the psychological and mental impairments are again part of the definition of the threshold and the rule that injuries or impairments must be permanent is also back in the definition. Section of the Insurance Act states Liability protection: income loss; earning capacity loss (1) Despite any other Act and subject to subsection (6), the owner of an automobile, the occupants of an automobile and any person present at the incident are not liable in an action in Ontario for the following damages for income loss and loss of earning capacity from bodily injury or death arising directly or indirectly from the use or operation of the automobile: 1. Damages for income loss suffered in the seven days after disability arising from the incident. 2. Damages for income loss suffered more than seven days after the incident and before the trial of the action in excess of 70 per cent of the gross income loss, as determined in accordance with the regulations, suffered during that period. 3. Damages for loss of earning capacity suffered after the incident and before the trial of the action in excess of 70 per cent of the gross loss of earning capacity, as determined in accordance with the regulations, suffered during that period. Application (2) Subsection (1) applies to all actions, including actions under subsection 61 (1) of the Family Law Act. 3 Liability protection: health care expenses Basic rule = no right to sue (3) Despite any other Act and subject to subsection (6), the owner of an automobile, the occupants of an automobile and any person present at the incident are not liable in an action in Ontario for damages for expenses that have been incurred or will be incurred for health care resulting from bodily injury arising directly or indirectly from the use or operation of the automobile unless as a result, the injured person has died or has sustained, (a) permanent serious disfigurement, or (b) permanent serious impairment of an important physical, mental or psychological function. This section states that an insured is not liable for bodily injury losses or death arising out of the use or operation of an automobile except under certain circumstances. The Act is telling us that in Ontario the basic rule is that there is no right to sue. Subsequent sections, however, outline the exceptions. They are: 3 Family Law Act, Section 61 (1) deals with the rights of dependants to sue in tort. 13

34 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Exceptions in Ontario We can sue in Ontario without meeting a threshold for pecuniary losses subject to the limitations specified in the act; and We cannot sue in Ontario for pain and suffering unless a threshold is met, and if it is met the judgment is subject to deductibles specified in the Act. Other jurisdictions Right to sue economic loss Liability protection: non-pecuniary loss Application of subss. (1), (3), & (5) Non-economic loss conditions When an action is brought in another province or state, where lawsuits are permitted, the policy must respond with a defence without any qualifications. On the economic loss side, there is a right to sue without the need to meet a threshold for all types of economic loss, but recovery from tortfeasors for loss of income and loss of earning capacity (both as determined by regulation) is limited to 70% of gross income loss suffered more than 7 days after disability arising out of the accident and up to the date of trial. Post trial, recovery for future losses is on a 100% gross income basis. (5) Despite any other Act and subject to subsection (6), the owner of an automobile, the occupants of an automobile and any person present at the incident are not liable in an action in Ontario for damages for non-pecuniary loss, including damages for non-pecuniary loss under clause 61 (2) (e) 4 of the Family Law Act from bodily injury or death arising directly or indirectly from the use or operation of the automobile, unless as a result of the use or operation of the automobile the injured person has died or has sustained, (a) permanent serious disfigurement, or (b) permanent serious impairment of an important physical, mental or psychological function. (6) Subsections (1), (3) and (5) do not protect a person from liability if the person is defended in the action by an insurer that is not licensed to undertake automobile insurance in Ontario unless the insurer has filed an undertaking under section On the non-economic loss side, a threshold must be met; it is defined as death, permanent serious disfigurement, or permanent serious impairment of an important physical, mental, or psychological function. A suit for non-economic loss is subject to a per person deductible. The deductibles can be increased or decreased by regulation. They apply in respect of each person who is entitled to damages for nonpecuniary loss. If the plaintiff is at fault, the amount of damages is reduced by the deductible before the award is reduced for contributory negligence. 4 Family Law Act, Section 61 (2) (e) states: an amount to compensate for the loss of guidance, care, and companionship that the claimant might reasonably have expected to receive from the person if the injury or death had not occurred. 14

35 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE Note that suits are still permitted against motorists insured outside of Ontario, unless their insurer has an agreement with the Commission, providing that the insurer s motor vehicle liability policy will provide the same basic coverage as the Ontario policy when the vehicle is operated in Ontario. Example If damages under this section were assessed at $65,000, there is a $30,000 deductible, and the plaintiff is 50% at fault, the $30,000 is deducted from the $65,000, the difference of $35,000 is subject to reduction by 50% in respect of contributory negligence and $17,500 would be available. Liability of other persons (10) Subsections (1), (2) and (3) do not relieve any person from liability other than a protected defendant. Definition A protected defendant is defined as the owner of an automobile, the occupants of an automobile, and any person present at the incident. This section clearly states that only the persons identified in Subsection (1), (2), and (3) of the Act (quoted earlier) are protected against suits. Any other persons found liable would still be held accountable. Definition Section states In sections to owner includes an operator as defined in subsection 16 (1) of the Highway Traffic Act 5 and a person who is a lessee for the purposes of section 192 of that Act; Uninsured automobile owner cannot sue Joint and several liability An owner or lessee operating or occupying his or her own uninsured automobile contrary to the Compulsory Automobile Insurance Act is prohibited from bringing an action in damages even though there may not have been a prosecution or conviction under that Act (1) If, in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an 5 Section 16. (1) of the Highway Traffic Act states: ''operator'' 'means the person directly or indirectly responsible for the operation of a commercial motor vehicle including the conduct of the driver of, and the carriage of goods or passengers, if any, in the vehicle or combination of vehicles 15

36 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) automobile, one or more protected defendants and one or more other persons are found to be liable for damages, (a) the other persons, i) are jointly and severally liable with the protected defendants for the damages for which the protected defendants are liable having regard to section and ii) are solely liable for any amount by which the amount mentioned in subclause i) is less than the amount that the other persons would have been liable to make contribution and indemnify the protected defendants in respect of damages in the absence of section 267.5; (b) the other persons are liable to make contribution and indemnify the protected defendants in respect of damages to the same extent as if section did not apply, up to the amount for which the protected defendants are liable having regard to section 267.5; and (c) the protected defendants are liable to make contribution and indemnify the other persons for the amount that the protected defendants are liable, having regard to section 267.5, reduced by the amount that the other persons are liable to make contribution and indemnify the protected defendants under clause (b). These provisions are fairly straightforward and follow normal tort procedures. There is, however, specific provision that liability is to be determined separately for each of the categories of damages. Separate determinations (2) Liability shall be determined under subsection (1) separately for each of the following categories of damages: 1. Damages for loss and loss of earning capacity. 2. Damages for expenses that have been incurred or will be incurred for health care. 3. Damages for pecuniary loss, other than damages referred to in paragraphs 1 and Damages for non-pecuniary loss, including damages for nonpecuniary loss under clause 61 (2)(e) of the Family Law Act. Liability determination (3) For the purposes of subsection (1), the liability of all persons involved in the incident from which the action arose shall be determined as though all persons wholly or partly responsible for 16

37 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE the damages were parties to the action even though any of those persons is not actually a party Liability will be determined taking into consideration all parties who contributed to the accident. Example Vehicles A, B, and C are involved in an accident. A is held to be blameless. It is found that the condition of the road and lack of proper signs substantially contributed to the accident thus making the municipality 25% liable while B is found to be 50% at fault and C is 25% at fault. If A sues only B and C but not the municipality, for his substantial injuries the most he will receive is 75% of the judgment. Additional Agreements of Insurer Expenses in addition to limit of liability The policy automatically provides insured persons with certain benefits in addition to legal liability coverage. Any expenses incurred by the insurer to provide the following Additional Agreements are paid in addition to the limit of liability available to the third party. Section 3.3 of the policy is self-explanatory. 3.3 You or other insured persons may be legally responsible for the bodily injury to, or death of others, or for damage to the property of others as a result of owning, leasing or operating the automobile or renting or leasing another automobile. In these cases, we will make any payment on your or other insured persons behalf that the law requires, up to the limits of the policy. We will also reimburse anyone covered by this policy for costs involved in providing immediate medical aid needed by someone hurt in an automobile incident. When we receive notice of loss or damage caused to persons or property we will investigate. We may then negotiate a settlement on behalf of you or other insured persons By accepting this policy you and other insured persons irrevocably appoint us to act on your or their behalf in any lawsuit against you or them in Canada, the United States of America or any other jurisdiction designated in the Statutory Accident Benefits Schedule arising out of the ownership, use or operation of the automobile. If someone sues you or other insured persons insured by this Section for losses suffered in an automobile incident, we will provide a defence and cover the costs of that defence, including investigation costs. We will pay all legal costs the court assesses against you and other insured persons in the lawsuit we have defended. 17

38 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) If there is a judgment against you or other insured persons, we will pay any post-judgment interest owed on that part of the amount the court orders that fall within the liability limits of your policy. We reserve the right to investigate, negotiate and settle any claim out of court if we choose. If you are sued for more than the limits of your policy, you may wish to hire, at your cost, your own lawyer to protect yourself against the additional risk The most we will pay on your behalf and on behalf of all other insured persons insured by this Section, for any one incident (over and above legal costs and post-judgment interest) will be determined by the extent of your coverage. The limit under your policy is shown on the Certificate of Automobile Insurance. Policy limits Note that when insureds are sued for greater amounts than their policy limits, they may need to hire a lawyer, at their own cost, to protect themselves against the additional risk. If a judgment is rendered for an amount greater than policy limits, the insured is responsible for the portion that exceeds policy limits and any postjudgment interest on that portion. Example1 You are sued for injuries suffered by Tom Jones in an accident for which you are legally responsible. Your insurer will hire lawyers at its expense and cover all costs of your defence in court. The court orders you to pay $10,000 in costs and $600,000 to cover losses. Your liability limit is $500,000. Your insurer will cover the $10,000 in costs and $500,000 of the judgment. It will also pay any interest owed on that amount from the day of the judgment. You will be responsible for the remaining $100,000 of the judgment and any interest owed on that. Accident outside Ontario The next two Additional Agreements deal with situations where the insured has an accident outside his or her home province. The basic principle applied is that the insurer follows the laws of the jurisdiction where the loss occurred, not the laws of the jurisdiction where the insured lives If the incident happens in a jurisdiction covered by this policy in which the minimum liability coverage required is higher than the limit shown on the Certificate of Automobile Insurance, we will honour the higher amount. We also agree not to use any legal defence that would not be available if the policy had been issued in that jurisdiction. 18

39 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE Example2 You have an accident in a province where the minimum liability coverage required is $500, Even though you are only carrying $200,000 of liability insurance, your insurer will pay up to $500,000. Example3 In Ontario, one of the Statutory Conditions of the policy prohibits operation of the vehicle unless the insured is authorized by law to drive or operate it. In Nova Scotia, however, the Statutory Condition states the insured is not to drive the vehicle unless he is for the time being either authorized by law or qualified to drive or operate the automobile. If a 20-year-old Ontario driver is involved in an accident in Nova Scotia, but has not yet passed his driver s exam, the insurer of the vehicle cannot automatically deny coverage. While that defense would be available in Ontario because the driver was not authorized by law to drive, that driver may be qualified to drive, and there would be no defense in that regard in Nova Scotia. In practice, the driver would have to prove he is qualified to drive by immediately passing the driver s exam. Then, the insurer is liable under the policy, because the accident occurred in Nova Scotia, where the law as stated in the policy wording is slightly different than in Ontario. Multiple names Only registered owner has insurable interest We will protect you and others named as insured by this policy, for claims made against each other. In such cases, we will act as if a separate policy was issued to each named insured. However, the total amount we will pay (over and above legal costs and post-judgment interest) cannot exceed the maximum coverage shown on the Certificate of Automobile Insurance. It is extremely important that only the names of registered owners of the automobile are shown on the policy. Only the owners have an insurable interest. By incorrectly 6 showing individuals that do not own the vehicle you could be extending perceived benefits, that were never intended by the policy, to these individuals. This could result in unnecessary litigation. Vehicles can, of course, be registered in more than one name, especially in business arrangements. 6 This could be the case for certain types of commercial vehicles. 19

40 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Example Jill Andrews and Jack Jones are in business together. Both are named in the insurance policy covering their van. They have $500,000 liability coverage. Jill is driving and Jack is a passenger when both are severely injured as a result of their combined negligence. They sue each other and Jill is awarded $300,000 and Jack is awarded $500,000. The combined amount paid by the insurer will be $500,000, apportioned between them, plus legal costs, and post-judgment interest. Summary The insurer agrees: a) To reimburse the insured for out-of-pocket expenses for immediate medical aid to third parties. This applies whether or not the insured is legally liable. b) To investigate, negotiate, and settle all reported claims. c) To defend any civil action brought against the insured with respect to the incident, even if it is groundless. d) i) To pay court costs assessed against the insured (subject to well defined legal rules of practice ). ii) To pay post-judgment interest on the insured portion of judgments for damages against the insured. The insured is responsible for paying interest on that part of a judgment that is in excess of the policy limits. Pre-judgment interest is included in the limit of liability available. e) To pay up to the minimum limits of the jurisdiction within Canada, the United States of America, or other jurisdictions designated in the statutory accident benefits schedule where the accident occurs. f) That it will not use any legal defence available in Ontario that would not be available if the policy had been issued in the jurisdiction where the accident occurred. Responsibilities of Insured Persons Insured s responsibilities 3.4 Your and Other Insured Persons Responsibilities You and other insured persons agree: to notify us in writing within seven days of any incident involving loss or damage to persons or property (or, if unable because of incapacity, as 20

41 5 LIABILITY COVERAGE; DIRECT COMPENSATION PROPERTY DAMAGE soon as possible after that), giving us full details of the incident and any claim arising from it; if requested, to give us a statutory declaration that the claim arose out of the use or operation of the automobile and that you or other insured persons were using, operating or responsible for the operation of it; to help us obtain all necessary information and evidence about the incident, including the attendance of witnesses, and to cooperate, but not financially, in any legal actions if we ask; to send immediately to us everything received in writing concerning the claim, including legal documents; and not to assume any liability for the incident, or settle any claim, except at your or other insured persons own cost, and not to interfere in any legal proceeding or in any negotiations we conduct to settle any claim. We may, on occasion, be required by law to make payments, even though we are not otherwise liable for them under this policy. If so, you or other insured persons will have to reimburse us upon demand for those payments. These responsibilities are reinforced in the Statutory Conditions which will be studied in more detail later in this course. Agreements of the Insured Insurer appointed as attorney Absolute liability The insurer is irrevocably appointed the insured s attorney to conduct civil defence(s) in actions arising out of the ownership, use, or operation of the automobile. This ties in with the insurer s agreement to defend the insured in such actions. The insurer cannot properly defend the insured if the insured does not carry out his or her responsibilities. The insured agrees to reimburse the insurer for all amounts the insurer is required to pay because of the absolute liability provisions of the law and for which the insurer would not otherwise be liable under the policy. Policy Limits Third party liability insurance is mandatory in all provinces and territories and no automobile policy may be issued for less than $200,000 ($500,000 in Nova Scotia and $50,000 in Quebec). Many types of commercial vehicles are subject to much higher minimum limits; these are beyond the scope of this text. 21

42 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Priorities of Payment All jurisdictions prescribe that a certain amount of the policy limit must be reserved for bodily injury claims and a certain amount for property damage claims. This is called priorities of payment and is heavily weighted in favour of bodily injury claims. Priorities of payment are only applied when the total liabilities of the insured to the claimant(s) are more than the limit purchased. However, Nova Scotia has an inclusive limit for bodily injury and property damage. Priorities of Payment Jurisdiction Bodily Injury Property Damage Alberta British Columbia Manitoba New Brunswick Newfoundland Northwest Territories Nova Scotia Ontario Prince Edward Island Quebec * Quebec ** Saskatchewan Yukon $190,000 $180,000 $180,000 $180,000 $180,000 $190,000 $190,000 $190,000 N/A $ 45,000 $ 90,000 $190,000 (inclusive limit $500,000) $10,000 $20,000 $20,000 $20,000 $20,000 $10,000 $10,000 $10,000 $50,000 $ 5,000 $10,000 $10,000 * Applies to automobile accidents in Quebec. ** Applies to vehicles excluded from the government plan (snowmobiles, farm tractors, and other exempted vehicles) and accidents outside Quebec. 22

43 6 Accident Benefits (Sections 4) Learning Objectives When you finish this study, you should be able to meet the following objectives: Explain the need for Accident Benefits. Define certain frequently used terms. State what a threshold is. Explain the rules with respect to legal actions for economic and non-economic loss resulting from an automobile accident. Identify who is covered under the Accident Benefits section of the policy. Summarize the coverage provided by the Accident Benefits section. Identify the exclusions under the Accident Benefits section. State briefly how Ontario deals with injuries when a resident is involved in an accident outside Ontario. List the optional coverages that every automobile insurer in Ontario must offer. 1

44 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Contents General History Bill 59 (1996) Bill 198 (2003) Automobile Insurance Reform (2010) Definitions Interaction With Other Systems Accident Benefits Coverage Income Replacement Benefits (IRB) Non-Earner Benefit Caregiver Benefit Medical, Rehabilitation, and Attendant Care Benefits Payment of Other Expenses (Reimbursements) Death and Funeral Benefits Summary of Optional Benefits Exclusions 2

45 6 ACCIDENT BENEFITS General History For many years, the automobile policy provided third party liability coverage and insurance covering damage to or destruction of the insured vehicle, but an injured driver and his or her passengers were unprotected if the insured driver was at fault. When the driver and/or passengers are injured or killed in an automobile accident, heavy financial burdens can result. When the driver is not responsible for an accident, he or she and any passengers may be in a good position to recover from the responsible party. It may be many months or even years, however, before liability is established and settlements are reached. In the meantime, there may be urgent expenses that must be paid. If the driver was at fault, there would have been no financial assistance available from automobile insurance a harsh penalty for one driving error. Fast financial assistance Society has become increasingly more litigious. This has overcrowded courtrooms and further increased delays in recoveries. Insurers claims costs kept rising sharply resulting in steadily increasing premiums, a large part of which was being eaten up by legal expenses rather than benefitting the injured motorists. Something had to be done so that accident victims could have access to quick financial assistance at a reasonable cost. Over the years motorists have been pressing governments for action and they in turn have pressured the insurance industry to come up with solutions. Ontario has had a number of different automobile insurance plans with varying no-fault elements. Original accident benefits OMPP Modest Accident Benefits were introduced in the 1960s, and offered immediate financial assistance without regard to fault. They were a means of tiding over an injured person until he or she could get back to work or claim from the responsible party, if there was one. June 1990 saw the implementation of the Ontario Motorist Protection Plan (OMPP), a threshold no-fault plan. It removed the right to sue in all cases except when the injury exceeded a verbal threshold. Injured parties could only recover the benefits specified in the No-fault Benefits Schedule from their own insurer; they could not sue the at-fault third party motorist unless the severity of their injuries met the threshold. Definition Verbal threshold: the words or language describing the nature and type of injury that must be suffered in order to be able to commence a legal action against the responsible party. 3

46 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) OMPP threshold Under the definition of the threshold, suits for non pecuniary loss (pain and suffering) and economic loss could only be brought if the injured person had a) died, or b) sustained permanent serious disfigurement, or c) suffered permanent serious impairment of an important bodily function caused by continuing injury which is physical in nature. Bill 164 threshold and SABS Effective January 1, 1994 a new System, Bill 164, came into being. It created a Statutory Accident Benefits Schedule (SABS) giving increased and wide-ranging benefits, and modifying the threshold for lawsuits against third party motorists for accidents occurring on or after that date. Legal actions were now permitted for pain and suffering only, and only when the injured person had a) died, or b) sustained serious disfigurement, or c) suffered impairment of an important physical, mental, or psychological function. No legal actions for economic loss Note that under Bill 164 suits were not permitted for economic loss. Note also, the differences between the two threshold definitions. The latter one makes no mention that the injury must be permanent. It was also expanded to include impairment of mental or psychological functions. The overall effect was that it became much more subjective and opened the door to additional litigation and increases in fraudulent claims. Bill 59 (1996) Auto Ins Rate Stability Act In June 1996 the Automobile Insurance Rate Stability Act (Bill 59) was passed. It included a new Statutory Accident Benefits Schedule which was modeled on the original SABS but with significant variations. Legal actions were permitted in many more situations. Benefit limits were substantially reduced in many cases. However, the right to recover from a responsible third party in the courts was expanded to include economic losses without any requirement to meet the threshold, and medical expenses if the injuries were catastrophic, subject to the provisions in the Act and its Regulations. Bill 198 (2003) In October 2003, Bill 198 was passed that amended the Statutory Accident Benefits. Legal actions were now permitted in one additional situation. The right to recover from an at-fault third party in the courts had expanded to include not just economic losses but also medical expenses subject to the verbal threshold. 4

47 6 ACCIDENT BENEFITS Economic Loss No Threshold to Be Met Subsection (1) permitted a person to sue for all types of economic loss, but recovery from tortfeasors for loss of income and loss of earning capacity (both as determined by regulation) was limited to 80% of net income suffered more than 7 days after the accident and up to the date of the trial. Post trial, recovery for future losses was calculated on a 100% gross income basis. Health Care Expenses Injury Must meet a Verbal Threshold Under Bill 198, legal actions were permitted for health care expenses (medical, rehabilitation, and attendant care benefits) for injured persons against the at-fault driver for injuries that met a verbal threshold as defined below. Non-economic Loss (Pain and Suffering) Must meet verbal threshold In addition, injured persons were permitted to sue for non-economic losses provided that the person s injuries met this verbal threshold a) death, or b) permanent serious disfigurement, or c) permanent serious impairment of an important physical, mental, or psychological function. Note that the word permanent was reinserted in the verbal threshold. A legal action for non-economic loss was subject to a per person deductible of $30,000 ($15,000 in the case of Family Law Act claims for the loss of care, guidance, and companionship). The deductibles could be increased, but not decreased, by regulation. Automobile Insurance Reform (2010) As a result of the 5-year review of automobile insurance, new regulations have been issued altering coverage again. Insureds now have the option of selecting between different standard coverages for their automobile insurance to meet their needs. A new standard policy has been introduced for all policies renewing on or after September 1, While this policy reduces the existing SABS coverage, insureds now have more options to increase limits and/or add optional coverages under the Accident Benefits section. Under Regulation 34/10 the right to sue at-fault third parties is unchanged and is subject to the same threshold definition as under Bill 198. The standard per person deductible applicable to non-economic losses under the new regulations has been increased but insureds now have the option of reducing this deductible through the new Added Coverage to Reduce Tort Deductibles endorsement (OCPF 48). 5

48 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Definitions Before we proceed with a more detailed study of Ontario Accident Benefits, it is important to understand the meaning of certain frequently used terms. Accident This means an incident in which the use or operation of an automobile directly causes an impairment or causes damage to any prescription eyewear, denture, hearing aid, prosthesis, or other medical or dental device. Impairment This is one of the key definitions in this Part. It means a loss or abnormality of a psychological, physiological, or anatomical structure or function. To be entitled to an income replacement benefit as well as other benefits and reimbursements, an insured person must sustain an impairment as a result of an automobile accident that either disables and prevents him or her from engaging in specific activities (e.g., employment) or results in reasonable and necessary expenses being incurred (e.g., in caring for a dependant or for treatment). Insured person This is an important definition and you should learn it and be able to apply it in any given circumstance. Insured person, in respect of a particular motor vehicle liability policy, means: (a) the named insured, any person specified in the policy as a driver of the insured automobile, and, if the named insured is an individual, the spouse of the named insured, and a dependant of the named insured or of his or her spouse, i) if the named insured, specified driver, spouse or dependant is involved in an accident in or outside of Ontario that involves the insured automobile or another automobile, or ii) if the named insured, specified driver, spouse or dependant is not involved in an accident but suffers psychological or mental injury as a result of an accident in or outside of Ontario that results in a physical injury to his or her spouse, child, grandchild, parent, grandparent, brother, sister, dependant or spouse s dependant, (b) a person who is involved in an accident involving the insured automobile, if the accident occurs in Ontario, or (c) a person who is an occupant of the insured automobile and who is a resident of Ontario or was a resident of Ontario at any time during the sixty days before the accident, if the accident occurs outside Ontario; 6

49 6 ACCIDENT BENEFITS To summarise the above, in this part of the policy insured person means: Accidents in Ontario Accidents outside Ontario Persons not involved in accident (a) For accidents in Ontario, involving the insured automobile or another automobile the named insured and any person specified in the policy as a driver of the insured automobile the spouse of the named insured ( spouse is defined in a later study) any dependant of the named insured or spouse a person who is involved in an accident involving the insured automobile (b) For accidents outside of Ontario A person who is an occupant of the insured automobile and who is a resident of Ontario, or was a resident of Ontario at some point during the 60 days prior to the accident. (c) Persons who were not actually involved in the accident The named insured, spouse, any dependant of either, and any person specified in the policy as a driver of the insured automobile not involved in an accident but who suffers psychological or mental injury as a result of an accident involving physical injury to defined family members. Section 268 (2) of the Act sets out the rules that determine from whom an injured person will collect no-fault benefits. Note: The definition only applies to spouses and dependents of the named insured, if the named insured is an individual. Priority of payments All persons must claim Accident Benefits from their own automobile insurer. If the person is a named insured on more than one automobile insurance policy, he or she may decide the insurer from which he or she will claim Accident Benefits. If there is no such insurance (e.g., person or spouse does not own an automobile), benefits are payable by the insurer of the automobile in which he or she was an occupant. If recovery cannot be had (e.g., no insurance on the automobile in which person was an occupant), then recovery can be made from the insurer of any automobile involved in the accident. If no recovery is possible from any of the above three sources (e.g., the injured person is a pedestrian who does not own an automobile and is the victim of a hit and run), the benefits will be paid by the Ontario Motor Vehicle Accident Claims Fund. Case Manager This is a person who provides services related to the coordination of goods or services for which payment is provided by a medical, rehabilitation, or attendant 7

50 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) care benefit. A claimant is eligible for case manager services only if he or she has sustained catastrophic impairments. Minor Injury Guideline Similar to the previous Pre-Approved Framework (PAF) which it replaces, the Minor Injury Guideline sets out the treatment framework for minor injuries. It represents a format to efficiently process pre-defined injuries, such as sprain, strain, and whiplash associated disorder, among others. (Many of these terms are defined within the Regulation.) The format is designed to promptly place the injured person into a treatment plan without the need for expensive and prolonged assessments. The injured person deals with his or her own health care provider who assumes overall responsibility for the pre-approved treatment available. Treatment and Assessment Plan This is defined to mean a document prepared by a member of a health profession which includes a description of the impairment to be treated and of the resulting disability, the estimated duration of the disability, the proposed goods and services, their estimated costs, their anticipated benefits, the persons who will provide them, and the duration of the services, a statement identifying a member of a health profession who will supervise the implementation of the treatment plan, and a statement by a health practitioner that the expenses contemplated are reasonable and necessary for the insured person s treatment or rehabilitation. Under the current system, claimants are still required to approach their own health practitioners for an assessment when applying for benefits. However, an insurer wishing to review or challenge this assessment or an ongoing benefit may (but is not required to) request a separate medical or health care examination from a health care provider of its choice. Disputes over assessment or examination findings or benefit determinations will proceed to the dispute resolution system at the Financial Services Commission of Ontario (the provincial regulator of insurance). Under the new regulation effective September 1, 2010, assessment costs are now included within the Medical and Rehabilitation limit. Insurer assessment costs are now limited to $2,000 per assessment. Interaction With Other Systems Accidents Outside of Ontario Choice of benefits Ontario residents injured in automobile accidents outside Ontario anywhere in Canada or the United States, have a choice between the Ontario level of benefits and the no-fault benefits available in the jurisdiction where the accident occurred. This could have serious implications for accidents occurring in Saskatchewan and Manitoba. These two provinces have substantial no-fault benefits but Ontario has 8

51 6 ACCIDENT BENEFITS not signed an agreement 1 with them along the lines of the Ontario/Quebec Agreement, by which the government insurer agrees not to subrogate against the Ontario resident for accidents in that province. Social Assistance Payments Auto insurer pays first This part sets out how benefits interact with social assistance payments. Automobile insurers are the first payer of benefits to an insured person who is also entitled to receive social assistance payments. Collateral Benefits Definition Collateral benefits are sources of entitlement outside of the automobile policy. The Act deals with benefits which might be available to an insured person following an automobile accident from sources other than an automobile policy. Such benefits could include certain payments from employer plans, income continuation plans, and various other sources. The major points are outlined below. The insurer may deduct the following amounts in calculating the amount of weekly income replacement or non-earner benefits payable to an insured person: Deductions permitted Deductions not permitted Net payments for loss of income that have been received by the insured person as a result of the accident under the laws of any jurisdiction or under any income continuation plan. Net payments for loss of income that have not been received by the insured person but are available to the insured person as a result of the accident, if the insured has not applied for them. Any temporary disability benefits being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident. Any other periodic benefit being received by the insured person in respect of an impairment that occurred before the accident. The Act also states certain types of benefits that may not be deducted, as for example, unemployment insurance benefits and payments under a sick leave plan that are available to an insured person but have not been received. 1 As at the time of this writing, June

52 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Although collateral sources for loss of income pay first, insurers are required to top up the loss of income paid by these sources to 70% of gross income to a maximum top-up of $400 per week. Workers Compensation Collection choice Insurer reimbursed While the insurer is not required to pay benefits to any person who is entitled to receive benefits from Workers Compensation, if an employee is injured in the course of operating an automobile, that same innocent employee is given the legal right to take action against the party responsible for the accident 2. The regulations provide for interim payments by the automobile insurer to the injured worker. Under this provision, a worker who considers that he or she has a tort claim that will get through the threshold may elect not to claim compensation under the Workplace Safety and Insurance Act, 1997, but rather to proceed with a tort claim. In such a case, the automobile insurer is required to pay the no-fault benefits until final resolution of the tort action. However, the automobile insurer will have a right to receive from the worker, through an assignment to which the Workers Compensation Board has concurred, the amount paid by way of such no-fault benefits. Accident Benefits Coverage Accident Benefits are explained in the Statutory Accident Benefits Schedule. The Schedule is not contained in the policy document but is made part of the policy by reference. It determines the entitlement of automobile accident victims. Every policy must provide the following Accident Benefits: Mandatory benefits 1. Income replacement benefit 2. Non-earner benefit 3. Caregiver benefit 4. Medical, rehabilitation, and attendant care benefits 5. Payment of other expenses 6. Death and funeral benefits 7. Optional benefits In discussing Accident Benefits coverage, reference to many different limits and time periods will be made. This is necessary in order to show how the coverages apply. Students are not expected to memorize all of these numbers but should know when and where monetary and time limits and deductibles apply. 2 This is set out in Section 10 of the Workplace Safety and Insurance Act,

53 6 ACCIDENT BENEFITS Note, however, that insurers must offer insureds the option to have the maximum benefits payable and individual or aggregate limits noted in the following sections indexed annually based on the Consumer Price Index for Canada. Income Replacement Benefits (IRB) An insured person who is disabled as a result of an automobile accident is entitled to a weekly income replacement benefit (IRB) if he or she meets any of the following qualifications: Persons entitled to benefits One week deductible Maximum payable 1. The insured person was employed at the time of the accident and, as a result of and within 104 weeks of the accident, suffers a substantial inability to perform the essential tasks of that employment; 2. The insured person was not employed at the time of the accident, however, was employed for at least 26 weeks in the 52 weeks prior to the accident or was receiving Unemployment Insurance benefits at the time of the accident, was at least 16 years of age or was excused from attending school under the Education Act, and as a result of and within 104 weeks of the accident, suffers a substantial inability to perform the essential tasks of the employment in which he or she spent the most time during the 52 weeks before the accident. This benefit is not payable for the first week of disability nor is it payable for more than 104 weeks of disability, unless the insured person suffers a complete inability to engage in any employment for which he or she is reasonably suited by education, training, or experience. The amount of the benefit for the first 104 weeks is 70% of the insured person s gross weekly income from employment, calculated in accordance with the Schedule. The maximum weekly income benefit is $400 unless an optional Income Replacement Benefit has been purchased, in which case the maximum might be increased to $600, $800, or $1,000. After 104 weeks, if the insured person remains eligible, he or she will receive the greater of the benefit received during the first 104 weeks and $185 per week. For the purpose of determining the amount of the IRB, income includes income from employment, self-employment, and unemployment insurance benefits. Benefits will be adjusted downward starting at age

54 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Non-Earner Benefit Eligible persons Non-earner benefits are payable to three classes of insured persons. They are those who suffer a complete inability to carry on a normal life and do not qualify for an IRB; or cease to receive a caregiver benefit because there is no longer a person in need of care; or were enroled on a full-time basis in elementary, secondary, or post-secondary education at the time of the accident, or had completed their education less than one year before the accident and were not yet employed in an employment that reflected that education and training. 26 week deductible Age 65 The non-earner benefit is equal to $185 per week and is not payable for the first 26 weeks after an accident nor until the person reaches age 16. For those who qualify by virtue of being enroled in education or having recently completed their education, after 104 weeks have elapsed since the onset of disability, the benefit becomes equal to $320 per week. The benefit is payable only so long as the person suffers a complete inability to carry on a normal life. It is adjusted downward at age 65. An insured person may not receive a non-earner benefit if he or she is receiving an income replacement benefit or caregiver benefit. Caregiver Benefit Eligible persons The insurer shall pay a caregiver benefit to or for an insured person who sustains a catastrophic impairment as a result of an accident if, as a result of and within 104 weeks after the accident, the insured person suffers a substantial inability to engage in the caregiving activities in which he or she was engaged at the time of the accident and if, at the time of the accident: The insured person was residing with a person in need of care, and The insured person was the primary caregiver for the person in need of care and did not receive any remuneration for engaging in caregiving activities. The caregiver benefit shall pay for reasonable and necessary expenses incurred as a result of the accident in caring for a person in need of care, but shall not exceed: Benefits $250 per week for expenses in caring for one person Plus an additional $50 per week for each additional dependant 12

55 6 ACCIDENT BENEFITS The caregiver benefit is an indemnity and is equal to the reasonable expenses incurred in caring for a person in need of care. The above figures are maximum amounts. The above figures are maximum amounts and the caregiver benefit is payable for no longer than 104 weeks of disability unless, as a result of the accident, the insured person is suffering a complete inability to carry on a normal life. An insured person may not receive a caregiver benefit if he or she is receiving an income replacement benefit or a non-earner benefit. For an additional premium, the insured has the option of extending the above caregiver benefit coverage to apply to situations where the claimant sustains non catastrophic injuries subject to the same maximum time limit. Medical, Rehabilitation, and Attendant Care Benefits Medical Benefit The medical benefit pays for all reasonable and necessary medical expenses that are not payable under another insurance plan or law. Benefits payable Medical, surgical, dental, optometric, hospital, nursing, ambulance, audiometric, and speech-language pathology services Chiropractic, psychological, occupational therapy, and physiotherapy services Medication Prescription eyewear Dentures and other dental devices Hearing aids, wheel chairs or other mobility devices, prosthesis, orthotics, and other assistive devices Transportation for the insured person, and an aide or attendant, to and from treatment sessions Other goods and services of a medical nature that the insured person requires An insurer is not liable to pay more than amounts established under Professional Services Guidelines published by FSCO. A system of accreditation of service providers has been implemented and insurers only have to pay for services from providers who are accredited. Transportation expenses Transportation expenses will be calculated based on a Transportation Expense Guideline produced by FSCO. If a person uses his or her own automobile, no payment may be made with respect to the first 50 kilometres per round trip to a treatment session. 13

56 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Rehabilitation Benefit The insurer shall pay for reasonable measures to reduce or eliminate the effects of any disability resulting from the impairment. Coverage includes the following expenses: Benefits payable Social rehabilitation including training, counselling, home modifications, vehicle modifications Vocational rehabilitation including counselling, vocational and academic training, workplace modification Transportation to and from sessions Other goods and services required The Professional Services Guidelines publishes the maximum amounts insurers will be required to pay for life skills training, family counselling, social rehabilitation counselling, financial counselling, employment counselling, vocational assessments, and vocational or academic training. With the accreditation system now in place, insurers do not have to pay for the services of those who are not accredited. Case Manager Services Catastrophic impairment An insurer must pay all reasonable and necessary expenses incurred on behalf of a person sustaining a catastrophic impairment as a result of an accident for services provided by a qualified case manager, in accordance with a treatment plan. The insurer does not have to pay more than the maximum established in the Professional Services Guidelines. Insurers are not required to pay for the services of case managers who are not accredited. The fees for case managers are payable within the limits for the medical and rehabilitation benefits. Attendant Care Benefit This benefit is for payment of all reasonable expenses incurred by or on behalf of an insured person for: Benefits payable Maximum amounts payable Services provided by an aide or attendant, or Services provided by a long-term care facility including a nursing home, home for the aged, or chronic care hospital The maximum amount payable under the Attendant Care Benefit is $3,000 per month when injuries are classified as non catastrophic and $6,000 per month for catastrophic impairment. This benefit is subject to a maximum limit of $36,000 for non catastrophic impairments and $1,000,000 for catastrophic impairment. The insured has two options to increase these limits. Under the first option the amount payable for non catastrophic impairment can be increased from $36,000 to $72,000 while the maximum limit for catastrophic impairment remains at $1,000,000 with a monthly maximum limit of $6,000. Alternatively, under the 14

57 6 ACCIDENT BENEFITS second option insureds can increase these limits from $36,000 to $1,072,000 for non catastrophic impairment and the maximum limit for catastrophic impairment can be increased to $2,000,000. No attendant care benefit is payable for minor injury, or expenses incurred more than 104 weeks after the accident, except where there is catastrophic impairment, or where the optional medical, rehabilitation, and attendant care benefit has been purchased and is applicable. Limits Maximum limits The maximum Medical and Rehabilitation Benefit for any one accident is $3,500 for minor injuries, $50,000 for non catastrophic injuries, and $1,000,000 for catastrophic injuries. Insureds have the option to increase these limits. The limit can be increased to $100,000 for non catastrophic injury claims while the benefit limit for catastrophic injury claims remains at $1,000,000: Or the insured can increase the benefit to $1,100,000 for non catastrophic injuries and to $2,000,000 for catastrophic injuries. This benefit is payable for the period commencing at the date of the accident until the later of either 25 years minus the insured person's age at the time of the accident, or 10 years (if the insured person was under 15 years of age at the time of the accident). If the insured person has suffered a catastrophic impairment, $1,000,000 is available for Medical and Rehabilitation benefits and there is no limit on the period within which the payments may be made. If the insured person has purchased the optional $2,000,000 Medical and Rehabilitation benefit, there is no limit on the time within which the expenses must be incurred. Despite the limits noted above, there is a combined maximum limit for Medical & Rehabilitation and Attendant Care of $1,172,000 if the insured person did not sustain a catastrophic impairment as a result of an accident and $3,000,000 if the impairment is catastrophic. Optional Dependant Care Benefit The insured has the option of purchasing this benefit which pays for reasonable and necessary additional expenses incurred by or on behalf of an insured person as a result of an accident in caring for the insured person s dependants, if the insured person: sustained an impairment as a result of the accident was employed at the time of the accident; and is not receiving a caregiver benefit The amount of Optional Dependant Care Benefit shall not exceed $75 per week for the first dependant and $25 per week for each additional dependant, to a 15

58 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) maximum amount of $150 per week. No Optional Dependant Care Benefit is payable in respect of an expense incurred after the insured person dies. Payment of Other Expenses Educational Expenses Reasonable expenses: maximum limit An insured person who was enroled in a program of elementary, secondary, postsecondary, or continuing education who, as a result of the accident, is unable to continue the program will be entitled to reimbursement for reasonable expenses incurred in respect of tuition, books, equipment, and room and board in respect of the program term or program year in which the person was enroled at the time of the accident. The maximum reimbursement for educational expenses is $15,000. Expenses of Visitors Reasonable expenses: no monetary limit Reasonable expenses incurred in visiting the injured insured person during treatment and/or recovery by a spouse, child, parent, grandchild, grandparent, brother, sister of the insured person will be paid. There are no monetary limits on this benefit. No amounts are payable for expenses incurred more than 104 weeks after the accident unless the insured person sustained a catastrophic impairment. Housekeeping and Home Maintenance Expenses Reasonable & necessary expenses: maximum limit The insurer must pay for reasonable and necessary additional expenses incurred on behalf of an insured person respecting housekeeping and home maintenance services if, because of the accident, the insured person sustained a catastrophic impairment and suffers a substantial inability to carry out the housekeeping and home maintenance services that he or she normally performed before the accident. This is subject to a maximum repayment of $100 per week from the date of the onset of the disability. Insureds also have the option to extend this benefit to apply when injuries or impairments are non catastrophic in nature subject to a maximum of 104 weeks from the date of the onset of the disability. Damage to Clothing, Glasses, Hearing Aids, etc. The insurer will pay for all reasonable expenses incurred by or on behalf of an insured person in repairing or replacing: Clothing worn by the insured person at the time of an accident Prescription eyewear, dentures, hearing aids, prostheses, and other medical or dental devices that are lost or damaged in an accident 16

59 6 ACCIDENT BENEFITS Cost of Examination Fee Payments The insurer pays all reasonable expenses incurred in arranging and attending an examination or assessment including the fees for this service. It also pays the fees charged by a person who provides a treatment plan and transportation expenses as outlined earlier. The amounts payable by an insurer for professional services rendered to an insured in respect of the examinations, assessments, certificates, reports, or treatment plans need not exceed the rates or maximum amounts established under the Professional Services Schedule published by FSCO. The amounts payable for any one assessment is limited to $2,000 and is included within the limit for Medical and Rehabilitation benefit. Death and Funeral Benefits Death Benefit If an insured person dies within 180 days as a result of an automobile accident or within 156 weeks if there has been continuous disability, and is survived by at least 30 days by a spouse or by one or more dependants, then benefits are paid as follows: Benefits payable $25,000 will be paid to the surviving spouse, unless the optional benefit was purchased, in which case $50,000 will be paid. $10,000 will be paid to each surviving dependant and to any person to whom the insured person has an obligation under a domestic contract or a court order to support them. This can be increased to $20,000, if the optional benefit has been purchased. If the insured person is not survived by a spouse, the $25,000 will be divided among his or her dependants and any person to whom he or she has an obligation under a domestic contract or a court order to support. If the insured person is survived by a former spouse whom he or she was obligated to support under a domestic contract or court order, $10,000 is payable to the former spouse. If the deceased was a dependent, $10,000 is payable to the person upon whom the deceased was dependent. Spouse Funeral benefit For the purpose of Death Benefits, spouse means the person who was the spouse at the time of the accident. A maximum funeral benefit of $6,000 is payable. This benefit can be increased to $8,000, if an optional benefit has been purchased. 17

60 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Summary of Optional Benefits Optional limits and coverages The following is a summary of the optional benefits (discussed above) that must be made available to all insureds by every insurer that writes automobile insurance in Ontario. 1. Increased income replacement benefits 2. Caregiver benefits extended to apply to non catastrophic claims 3. Increased and extended medical, rehabilitation, and attendant care benefits 4. Addition of dependant care benefits 5. Housekeeping and home maintenance expenses extended to apply to non catastrophic claims 6. Increased death and funeral benefits 7. Annual indexation of benefits and limits based on the Consumer Price Index These optional benefits may be purchased at any time before an accident in respect of which a claim is made. The amount of an optional benefit is available only to the named insured, any person specified in the policy as a driver of the insured automobile, and if the named insured is an individual, the spouse of the named insured, and any dependant of the named insured or spouse. Exclusions Insurers are not required to pay income replacement or non-earner benefits, educational expenses, expenses of visitors, and housekeeping and home maintenance expenses: No benefits payable to driver To a person, who as a result of the accident, was convicted of operating the automobile while his or her ability to operate the automobile was impaired by alcohol or a drug, or of driving while his or her blood alcohol level exceeded the limits permitted by law, or of any other offence whether or not related to the operation of the automobile. To a person, who as a result of the accident, is asked to provide a breath sample and is convicted of failure to provide the sample. To a person, who as the driver, knew or ought to have known that he or she was operating the automobile while it was not insured under a motor vehicle liability policy. To a person, who as the driver, was driving the automobile without a valid driver s licence. To a person, who as the driver, is an excluded driver under the policy. 18

61 6 ACCIDENT BENEFITS To a person, who as the driver, knew or ought to have known that he or she was operating the automobile at the time of the accident without the owner s consent. The insurer also will not pay benefits in respect of: No benefits payable to any person Criminal charges Other benefits are payable Any person who has made, or who knows of, a material misrepresentation which induced the insurer to enter into the contract of insurance or who intentionally failed to notify the insurer of a change in the risk material to the contract. An occupant of an automobile at the time of the accident who knew or ought reasonably to have known that the driver was operating the automobile without the owner s consent. This does not prevent an excluded driver or any other occupant of an automobile driven by an excluded driver from recovering Accident Benefits under a motor vehicle liability policy in respect of which the excluded driver or other occupant is a named insured. Where a person is engaged in, or an occupant of an automobile that was being used in connection with an act for which the person is charged with a criminal offence, the insurer must hold, in trust, the moneys payable for income replacement benefit, non-earner benefit, educational expenses, expenses of visitors, and housekeeping and home maintenance expenses. These must be paid if the person is found not guilty. Criminal offence means operating an automobile with a blood alcohol concentration exceeding the legal limit, failing to comply with a lawful demand for a breath sample, or any other criminal offence, whether or not the offence is related to the operation of an automobile. Excluded persons are eligible for other than the above mentioned benefits. 19

62 16 Quebec Plan Learning Objectives When you finish this study, you should be able to meet the following objectives: Explain who provides automobile insurance in Quebec and the legislation that regulates it. Outline the coverages delivered by the government and those delivered by private insurers. Describe the main features of the no-fault bodily injury benefits. Describe how coverage for property damage is provided. State the purpose of the Driver's Fault Chart. Explain how the no-fault concepts affect accidents involving non-residents. 1

63 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Contents The Automobile Insurance Act Compensation for Bodily Injury Reciprocal Claims Agreements Bodily Injury Benefits Fonds d indemnisation (Indemnity Fund) Bodily Injury not covered by SAAQ The Groupement des Assureurs Automobiles The Direct Compensation Agreement Loss Situations The Quebec Automobile Insurance Application The Quebec Automobile Insurance Policy (Owner's Form) Structure of the QPF 1 Civil Liability (Section A) Loss of or Damage to Insured Automobile (Section B) Endorsements Summary of the Quebec Plan 2

64 16 QUEBEC PLAN The Automobile Insurance Act History of the Act Quebec has a dual system In 1978, the government of Quebec implemented a public automobile insurance plan to compensate Quebecers physically injured in an accident without regards to fault. The Société de l assurance automobile du Québec (SAAQ) was created by the Automobile Insurance Act (known as the Régie de l assurance automobile) to administer the plan. Before 1978, all automobile insurance in Quebec was provided by private insurers. With the passing of the Automobile Insurance Act, a new split system was implemented where government and private insurers each have separate responsibilities, provide separate mandatory coverages, and do not compete in the delivery of automobile insurance. The government plan administered by the SAAQ provides basic coverage for bodily injury. Private insurers provide Civil Liability coverage, which corresponds to the third party liability coverage available in other provinces. Coverage for property damage is provided on a direct compensation basis, and similar to Ontario and New Brunswick, insureds deal only with their own insurers for claims regardless of fault. (This coverage is discussed in detail below.) Financing The Quebec government automobile insurance plan and all of its functions are financed mainly by automobile owners when they register their vehicles, by automobile drivers when they obtain or renew their driving licences, and by investment income. Compensation for Bodily Injury No-fault bodily injury cover As a general rule, all residents of Quebec (and their dependants) who suffer bodily injury caused by an automobile in or outside Quebec are entitled to compensation under the no-fault bodily injury plan administered by the SAAQ. Private insurers only become involved in certain special situations. Non-residents involved in an accident in Quebec are also entitled to compensation, but only to the extent that they are not responsible for the accident. For example, if a non-resident is 70 percent liable for an accident in which he or she is injured, reimbursement would be for 30 percent of the covered bodily injury, subject to certain maximum limits. Liability is assessed by the ordinary rules of law in these cases, not by the Driver s Fault Chart (which only applies to property damage). A non-resident involved in an accident as a driver or a passenger in an automobile registered in Quebec is considered a Quebec resident under the Automobile Insurance Act. Some provinces have a special reciprocal agreement with Quebec. 3

65 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Residents of these provinces would have the same rights under the Accident Benefits section of their standard policy forms as Quebecers do under the Quebec plan. Persons entitled to compensation To summarize, as a general rule, the following categories of persons are entitled to compensation for bodily injury: Residents of Quebec (and their dependants) for accidents that occur in Quebec or outside Quebec. The owner, driver, and passengers of automobiles registered in Quebec, involved in an accident in Quebec. Non-residents of Quebec, involved in an accident that occurs in Quebec with a Quebec insured, but only to the extent they are not responsible for the accident (unless there is a reciprocal agreement between the SAAQ and the province where the victim is a resident). Right of action extinguished Quebec was the first jurisdiction in North America to totally ban lawsuits for bodily injury caused by an automobile. Neither residents, nor non-residents involved in an accident occurring in Quebec have a right to sue. Victims, in return, expect to be paid for claims within a reasonable time and without having to incur legal fees. If the accident occurred outside Quebec, the right to sue is subject to the legislation of the jurisdiction where the accident occurred. Usually a resident of Quebec who sustains bodily injury can sue a responsible party to recover the portion of bodily injury damages that exceeds the compensation paid by SAAQ; and a third party who is a non-resident may sue a responsible resident of Quebec. (The Quebecer is protected under the Civil Liability coverage provided by a private insurer.) The following alternatives are available to challenge decisions rendered by the SAAQ: The Bureau de révision The victim must complete an Application for Review and submit it to the SAAQ within 60 days of the postmarked date of the decision. An appeal before the Commission des affaires sociales When the victim is dissatisfied with the review decision by the SAAQ an appeal may be filed within 90 days of the date the Bureau de révision rendered its decision. The Commission s decision is final. 4

66 16 QUEBEC PLAN Reciprocal Claims Agreements Agreements with Alberta, Manitoba, and Ontario Accidents in Quebec Reciprocal agreements were made between the SAAQ and the governments of Alberta, Manitoba, and Ontario to deal with compensation to injured automobile accident victims. They apply to all accidents occurring after the agreements were signed. The reciprocal agreements provide that non-residents of Quebec who are insured under an automobile policy issued in Alberta, Manitoba, or Ontario will receive the same compensation from their own insurers as they would have received had they been insured under the Quebec plan, regardless of who was responsible for the accident. These insurers will also indemnify their residents if, as pedestrians, they are struck in Quebec by an automobile owned or driven by an insured resident of Quebec. In exchange, the Société relinquishes its right to recover (from non-residents responsible for the accident) any compensation paid to other victims of that accident. Accidents in Alberta, Manitoba, or Ontario When accidents occur in Alberta, Manitoba, or Ontario, the agreements have no effect on the rights of the parties. A Quebec resident will receive compensation from the SAAQ for bodily injury, and will have the right to sue for damages that exceed the amounts paid by the SAAQ. Non-residents maintain their right of action against a Quebec resident responsible for the accident. Upon payment of claims, the SAAQ has subrogation rights against non-residents and their insurers for amounts in excess of the sums payable under the nonresident s policy. Bodily Injury Benefits Basic coverage provided under the Act In Quebec, the government provides the basic compulsory bodily injury coverage. Even if the indemnity provided by basic coverage does not fully cover their economic loss, Quebecers cannot sue the person responsible for the accident because the right to sue has been removed. To prevent this gap in protection, optional Accident Benefits coverage can be purchased from private insurers. The Automobile Insurance Act provides for the following bodily injury benefits: Income replacement and other indemnities Death benefits Compensation for non-pecuniary damage Reimbursement of certain expenses and rehabilitation 5

67 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Income Replacement Income replacement benefits are determined based on the net income of the victim. No indemnity is payable for the first seven days after an accident. Thereafter, indemnity payments are made every other week. The Automobile Insurance Act categorizes victims as follows: Categories of victims Full-time employees Temporary or part-time employees Persons unemployed but able to work Persons under age 16 Students aged 16 or over attending a secondary or post-secondary educational institution on a full-time basis, and students who have employment earnings Persons aged 64 or over Persons unable to hold any employment A person who does not qualify for income replacement, may be entitled to another type of reimbursement or lump sum payment. Death Benefits Funeral expenses Victim without spouse or dependants Victim with spouse Victim with spouse and dependant(s) The SAAQ pays a lump sum indemnity for funeral expenses to the beneficiaries of the deceased victim, up to a prescribed limit. A victim s parents are entitled to share the lump sum indemnity equally over and above the indemnity for funeral expenses if the victim is a minor. Otherwise, the settlement goes to the estate. The surviving spouse is entitled to a lump-sum benefit based on the victim s gross income and age. Dependants other than the spouse are also entitled to a lump-sum benefit. This amount is established based on their age at the time of the victim s death. If a dependant is already disabled at the time of the victim s death, an additional lump-sum benefit will be paid. Orphans of a single-parent family (of which the only parent died in the accident) are entitled, in addition to their indemnity as dependants, to the lump-sum spousal benefit divided equally among them. The lump-sum benefits paid to the spouse or dependants of a deceased victim may be spread into periodic installments over a period of 20 years. 6

68 16 QUEBEC PLAN Other Benefits In addition to income replacement indemnity and death benefits, the Automobile Insurance Act provides for (a) a lump-sum payment for injury, disfigurement, dismemberment, suffering, or loss of enjoyment of life; (b) reimbursement of some of the expenses incurred for medical treatments paramedical treatments transportation by ambulance purchase of prostheses or orthopedic devices rehabilitation services home assistance replacement of clothing replacement of manpower in a family business However, certain limitations apply. Coverage is only available for costs not already covered by a social security plan. These benefits are paid to any victim, regardless of who is at fault. Summary of government plan Quebec residents The SAAQ Plan Covers everywhere in the world regardless of fault Non-residents in Quebec only according to the percentage they were not-at-fault for the accident, except for residents of Alberta, Manitoba, and Ontario drivers or passengers of a vehicle registered in Quebec The main classes of indemnities are income replacement death benefits other indemnities permanent after-effects reimbursement of expenses and rehabilitation 7

69 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Fonds d indemnisation (Indemnity Fund) Purpose of the Fonds The Automobile Insurance Act also provides for the Fonds d indemnisation des victimes d accidents d automobile, to be maintained as a service within the SAAQ and used mainly to compensate innocent victims of property damage since most victims of bodily injury will be satisfied through the government plan. The SAAQ is responsible for the administration and management of the Fonds. A victim sustaining property damage, and in some cases bodily injury, who has obtained a final judgment in Quebec following an automobile accident that occurred in Quebec may apply to the Fonds. Payments are limited to $50,000 per accident. The Société pays compensation up to $10,000 for property damage to a vehicle. All compensation payable for property damage is subject to a $500 deductible set by regulation. For damage caused to a vehicle, the deductible will be the higher of $500 for a vehicle valued under $5,000 on the day when the accident occurred; or 10% of the worth of a vehicle valued $5,001 or more on the day of the accident. The victim must submit a sworn declaration confirming that the judgment has not been satisfied and no insurer will benefit by the amount claimed. The statement must also disclose any other possible claim arising out of the same accident. Payment by the Fonds transfers to it all the claimant s rights of recovery. Unidentified third party When an at-fault party is not identified the victim may give the Fonds a detailed written notice and request payment for damages. There are certain restrictions that apply. The Fonds acts in a similar manner to the highway victims indemnity funds or unsatisfied judgment funds operating in other provinces. Bodily Injury not Covered by SAAQ Although the government covers bodily injury for accidents occurring on a public highway in Quebec, and involving at least one automobile, there are situations that are not covered by the SAAQ plan. In these situations, private insurers responsibility extends beyond property damage to also handle bodily injury claims. The following are examples of such situations: An accident involving a motorized recreational vehicle off a public highway results in a broken leg for the victim. An insured Quebecer hits a pedestrian in Florida. A non-resident of Quebec is a passenger in the insured s automobile in an accident outside of Quebec, for which the insured is at fault. 8

70 16 QUEBEC PLAN The Groupement des assureurs automobiles The Automobile Insurance Act established the Groupement des assureurs automobiles (GAA), which includes all insurers authorized to underwrite automobile policies in Quebec. The main duties of the GAA are: Access to auto insurance PRR Damage appraisal (a) To establish a mechanism to enable every automobile owner to find an authorized insurer with whom he or she may purchase liability insurance. Each insurer doing business in Quebec has agreed to provide this insurance to any automobile owner requesting it through the risk sharing plan called Plan de répartition des risques (PRR), if needed. The purpose of the PRR is similar to the risk sharing pools managed by the Facility Association in other provinces. Both allow participating insurers to share the underwriting profit or loss and administrative costs of the pooled risks. However, in Quebec, insurers may transfer any risk they have accepted through the regular market that does not meet their minimum underwriting standards. In other provinces, insurers transfer risks that meet their underwriting rules, but present higher than average risk of loss. (This topic is discussed in more detail in another study.) (b) To oversee collision repair appraisal. Under the Automobile Insurance Act, the GAA has created a network of appraisal centres, which are subject to its standards, procedures, and regulatory measures. The goal is to keep premiums reasonable, and to minimize compensation costs by using precise and professional appraisal techniques. (c) To establish and publish a standardized accident report form. (d) To establish and administer a direct compensation agreement. Statistical agency Claims tracking system The GAA also acts as an automobile statistical agency on behalf of the Inspector General of Financial Institutions. The GAA is also responsible for the management of the Fichier central des sinistres automobiles (Automobile Claims Tracking System). It allows all insurers to obtain, for underwriting and rating purposes, the claims file of anyone holding a Quebec driver s licence. The Direct Compensation Agreement In Quebec, all automobile insurers are bound by the Direct Compensation Agreement for the settlement of automobile insurance claims. Under the provisions of this agreement, liability for property damage in a collision occurring 9

71 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) in Quebec, between at least two automobiles whose owners have been identified, is determined by the Driver s Fault Chart similar to the way the Fault Determination Rules are used in Ontario and New Brunswick. Under the policy s Civil Liability section, insurers pay for damage to an insured s vehicle to the extent that the insured is not-at-fault. The General Provisions of the Direct Compensation Agreement also provide for cases where the insured is covered for both Civil Liability and optional coverage for Loss of or Damage to Insured Automobile (such as Collision): 1. If both coverages are provided by the same insurer, such insurer must first indemnify its own insured in accordance with its contract and then shall apply the Direct Compensation Agreement with respect to any sum payable under the Direct Compensation Agreement. 2. If the coverages are provided by different insurers, the Collision insurer pays for damage to the automobile and then recovers any sum payable on the basis of the Driver s Fault Chart apportionment from the Civil Liability insurer. Thus, the Civil Liability insurer must reimburse the Collision insurer for the percentage that the insured was not-at-fault. Loss Situations Property damage claim Example 1 Caroline and Nicole are involved in an intersection accident in Quebec. Caroline is covered for Civil Liability by insurer A and Nicole is covered for Civil Liability by insurer B Caroline and Nicole are both 50% at fault and neither has Collision coverage. If collision damage to Caroline s vehicle is $1,000 and collision damage to Nicole s vehicle is $800, each will make a claim from her own Civil Liability insurer. Payments will be apportioned as follows: Caroline Paid by insurer A under Caroline s Civil Liability coverage $500 ($1,000 x 50% since she was 50% at fault) Total recovery $500 Nicole Paid by insurer B under Nicole s Civil Liability coverage $400 ($800 x 50% since she was 50% at fault) Total recovery $400 10

72 16 QUEBEC PLAN Example 2 For the above loss, if Caroline is found 100% at fault and Nicole is found 0% at fault, payments would be apportioned as follows: Caroline Paid by insurer A under Caroline s Civil Liability coverage $0 (Caroline is 100% at-fault so is not eligible to make a claim under her Civil Liability coverage.) Total recovery $0 Nicole Paid by insurer B under Nicole s Civil Liability coverage $800 ($800 x 100% since she is innocent) Total recovery $800 Example 3 Where both Caroline and Nicole are 50% at fault and both have Collision coverage with a $500 deductible from the same insurer as their Civil Liability coverage, payments will be apportioned as follows: Caroline Paid by insurer A under Collision coverage $500 ($1,000 less the $500 deductible) Paid by insurer A under Caroline s Civil Liability coverage $250 ($500 deductible x 50% since she is 50% not-at-fault) Total recovery $550 Nicole Paid by insurer B under Collision coverage $300 ($800 less the $500 deductible) Paid by insurer B under Nicole s Civil Liability coverage $250 ($500 deductible x 50% since she is 50% not-at-fault) Total recovery $550 Note: If both Caroline and Nicole purchased their Civil Liability and Collision coverages from different insurers, then Caroline s Civil Liability insurer would reimburse Caroline s Collision insurer for $250 ($500 x 50%). Similarly, Nicole s Civil Liability insurer would reimburse Nicole s Collision insurer for $150 ($300 x 50%). 11

73 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Liability determined by the Driver s Fault Chart does not take into consideration such things as: admission of guilt actions of a pedestrian speed weather conditions visibility road conditions light, sound, or hand signals marked or unmarked road lines (unless specified in the chart) The Quebec Automobile Insurance Application Application provides essential rating information The application contains the information required to underwrite, rate, and issue the policy. In Quebec, the insurer must supply a true copy of the application to the insured when the policy is issued, so great care must be taken to ensure that all questions are answered and all the necessary information has been obtained. The information required is the same whether it is received in writing or taken over the telephone. The application form itself is not regulated in Quebec, so questions found in applications can vary slightly from one insurer to another. However, the Declarations derived from it are standard for all insurers. Signed application Discrepancies between application and policy Generally in Canada, insurers are not required to obtain signed applications before issuing automobile policies. Whether an application is signed by the insured, the insurer must still send the insured a copy of the completed application form. In Quebec, the insurer s obligations are detailed in the Civil Code. If there are any differences between the application and the policy, the insurer must draw special attention to these differences in a separate written document to the client. If a policy is not identical to the application and the insured is not properly notified, the insured can demand that the coverage requested in the application be provided. For example, if the application specified a $500,000 limit for Civil Liability coverage but the policy was issued for $200,000, the insured is entitled to be insured for $500,000. Burden of proof rests with insurer The burden of proving any misrepresentation or a failure to disclose required facts rests with the insurer. If the insured misrepresents the facts, it will be easier for the insurer to prove it if the application has been signed by the client and contains the misleading or deceptive statement. 12

74 16 QUEBEC PLAN The Quebec Automobile Insurance Policy (Owner s Form) The Owner s Form (QPF 1) is the most widely used wording in Quebec to cover vehicle owners, and originates from the SPF 1. Other forms are used to cover specialized risks such as garage risks, which are covered under the QPF 4. Suitable for most vehicle owners The QPF 1 is suitable to cover private passenger automobiles, commercial automobiles, snowmobiles, motorcycles, camping trailers, and many other types of automobiles. When the Automobile Insurance Act was introduced in 1978, the section relating to Accidents Benefits was eliminated from the wording. Consequently, the QPF 1 includes only two sections of coverage Section A Civil Liability Section B Loss of or Damage to Insured Automobile If an insured chooses to purchase extended Accident Benefits coverage, the QEF 34 (Accident Benefits Endorsement) is used. Structure of the QPF 1 The QPF 1 contains the Declarations, the Insuring Agreements, and the General Provisions, Definitions, and Exclusions. Each of these sections will be described and their use specified. (Conditions prescribed by legislation, similar to the Statutory Conditions applicable in other provinces, also form part of the policy but we will not discuss them here.) The QEF 34 may also be included with the policy wordings, but must be purchased by the insured or included as part of the overall package. Declarations Insuring Agreements Section A Civil Liability Definitions Exclusions Additional Agreements Agreements of Insured The QPF 1 Section B Loss of or Damage to Insured Automobile Definition and Deductible Clause Exclusions Additional Agreements 13

75 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) General Provisions, Definitions, and Exclusions Conditions Cancellation Table Declarations Declarations This part contains the main items of the application. It identifies the names of the parties, describes the risk, identifies the coverages, and identifies other information relevant for underwriting the risk. Seven items are considered within the Declarations: Item 1 identifies the insured and where the vehicle will be principally operated. Item 2 identifies the policy period. All policies go into effect and expire at 12:01 A.M. standard time at the insured s address. Item 3 identifies the vehicle information and rating criteria. It also contains the names of lienholders and other creditors having a financial interest in the vehicle. Under the Civil Code, creditors are required to give notice of their interests and to prove them if necessary. It is not up to the insurer to investigate whether a lien exists on a vehicle before settling a claim. Item 4 specifies the coverages purchased by the insured, the premiums, and the deductibles. Item 5 must be completed if the applicant is not both the registered and the actual owner of the described automobile. Item 6 allows insurers to record two types of information to be used for risk assessment and rating: Spontaneous declarations made by the applicant without being asked a question. The formal questions asked by the insurer and the applicant s responses, which can include date of birth, occupation, and employer; use of vehicle; and the driver s past experience relating to driving offenses and past claims. The insurer is permitted to ask questions about all relevant issues rather than being tied to the standard questions found in earlier application forms. Information disclosed must be clearly reproduced in the application, which may then be signed by the insured and a copy given to the insured. 14

76 16 QUEBEC PLAN Item 7 Notice, states that the client and the insured must report all drivers who use the automobile and who do not use it exceptionally. Insuring Agreements Insuring Agreements This is the heart of the policy. The scope of the contract is explained by identifying the risks to be covered. Definitions The first paragraphs under each section define the coverage provided. Exclusions Each section has its own exclusions. Other exclusions are found under General Provisions, Definitions, and Exclusions and, unless otherwise mentioned, these exclusions will affect both sections of the policy. There are also obligations found under Conditions, which affect both sections of the policy. Additional Agreements These are supplementary benefits which the insurer agrees to provide to the insured. An Additional Agreement may have a high financial value, for example, lawyers fees to defend the insured, or it may simply provide peace of mind for the insured, such as waiving subrogation against any authorized driver under section B. General Provisions, Definitions, and Exclusions This part of the policy contributes to a better understanding of the contract. Mainly it defines the words used in the contract, such as, spouse or automobile. It also sets the territorial limits where coverage applies, and outlines several exclusions. When a risk is to be excluded under sections A and B, this is where it is done. Exclusions unique to each section are found within the sections themselves. Conditions The Conditions are drawn from legislation. Their purpose is to establish the obligations of each party to the contract. They are standard in all automobile insurance contracts (QPF 1, QPF 4, etc.) as opposed to the General Provisions, Definitions, and Exclusions, which vary according to the protection provided under the policy. Civil Liability (Section A) Compulsory coverage A minimum amount of Civil Liability insurance is compulsory and must be purchased from private insurers. Optional higher limits can also be purchased. Since bodily injury claims resulting from motor vehicle accidents in Quebec are 15

77 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) dealt with through the government plan, Civil Liability coverage under the QPF 1 will only be triggered in instances where the Automobile Insurance Act does not apply, such as in accidents outside the province, accidents involving vehicles outside the scope of the government plan, or accidents involving property damage other than vehicular damage. Optional coverage Non-residents, property damage According to Quebec law, the ordinary negligence of insureds is enough to make them liable for damage or injury arising out of an automobile accident, subject to the provisions of the Automobile Insurance Act. Loss of or Damage to Insured Automobile (Section B) Coverage for Loss of or Damage to the Insured Automobile (own damage coverage) is not compulsory. However, all own damage must be claimed under the vehicle owner s policy regardless of who was at fault. Coverage is similar to that of other provinces. The insured may choose from All Perils, Collision or Upset, Comprehensive, or Specified Perils. Deductibles apply unless the loss was caused by fire or lightning. Collision with a person or an animal is covered under the Comprehensive coverage. If the non-resident s insurer is licensed to write business in Quebec, the Direct Compensation Agreement applies. If the non-resident s insurer is not licensed to write business in Quebec, the Direct Compensation Agreement does not apply. Thus, the insurer providing the Civil Liability coverage would not pay for collision damage to its insured s automobile. The insurer providing Collision coverage, whether it is the same as the Civil Liability insurer or a different one, would have a right of recovery (by subrogation of its insured s rights) against a third party, to the extent that the third party was liable. In other words, the ordinary rules of law apply. Endorsements In Quebec, the automobile policy forms must be approved by the Inspector General of Financial Institutions. This applies to endorsements as well. There are circumstances where special forms may be approved but the provisions of the Automobile Insurance Act must be followed. The Conditions of the policy may not be changed by endorsement. In Quebec, automobile endorsements are prefixed QEF (Quebec Endorsement Form), such as the QEF 16 Suspension for Storage endorsement. The insured s signature is required when coverage is reduced as compared to the standard wording. 16

78 16 QUEBEC PLAN The SAAQ Summary of the Quebec Plan Société de l assurance automobile du Quebec The SAAQ provides no-fault bodily injury and death benefits to Quebec residents, for accidents occurring in and out of the province of Quebec. Visitors are also entitled to such benefits, but only to the extent they were notat-fault for an accident occurring in Quebec. Tort is abolished for bodily injury and death in Quebec. Quebec residents get the SAAQ benefits if they are involved in an accident outside Quebec, and retain their right to sue outside Quebec to recover the amount of damage in excess of benefits. The Fonds d indemnisation is administered by the SAAQ. It is intended for victims of bodily injury or property damage caused by an uninsured automobile or an unidentified third party. There is a $50,000 limit per claim and the Fonds mainly deals with property damage claims. The GAA Groupement des assureurs automobiles Private insurers must be authorized to do business in Quebec. They are gathered in a corporation called Groupement des assureurs automobiles, created in accordance with the Automobile Insurance Act. The Automobile Insurance Act defines the responsibilities and powers of the GAA Availability of liability insurance Damage appraisal Direct Compensation Agreement Standard Accident Report Risk sharing Statistical agency Management of the Fichier central des sinistres automobiles Private insurers may be involved in bodily injury compensation for bodily injury to a third party excluded from the SAAQ mandate; or coverages which supplement those provided by the SAAQ (Endorsement QEF 34, for example). The Direct Compensation Agreement applies to collisions occurring in Quebec and involving at least two automobiles (or parts of automobiles) when their owners have been identified. An automobile owner can only take action against his or her own insurer to the extent that the Agreement applies. 17

79 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) QPF 1 is used to cover Civil Liability (Section A) and Loss of or Damage to the Insured Automobile (Section B). Despite the existence of a government plan covering bodily injury, private insurers may have to compensate third parties for bodily injury for accidents that occur off a public highway; and accidents that occur outside Quebec where victims are non-residents of Quebec. Organizational Chart: Automobile Insurance Act SAAQ Compensation for bodily injury and plan financing Fonds d indemnisation Automobile registration Issuing drivers licenses Highway Safety Code GAA Availability of mandatory insurance: QPF 1: Section A Direct Compensation Agreement Standard Accident Report Risk sharing mechanism Statistical agency Fichier central des sinistres automobiles. 18

80 17 Saskatchewan, Manitoba, British Columbia, Alberta, New Brunswick, Newfoundland, Nova Scotia, and Prince Edward Island Learning Objectives When you finish this study, you should be able to meet the following objectives: For each of Saskatchewan, Manitoba, British Columbia, Alberta, New Brunswick, Newfoundland, Nova Scotia, and Prince Edward Island Describe how coverage is provided and by whom Outline the basic compulsory coverages including limits For each of Saskatchewan, Manitoba, and British Columbia Explain why Standard Policy Forms are not issued for basic coverage under government insurance plans. State what additional coverages are available and from whom. For each of Alberta, Newfoundland, Nova Scotia, and Prince Edward Island Define tort. Explain how insureds are compensated for vehicle damage under tort-based automobile insurance schemes. For New Brunswick Explain why fault must still be determined when settling Direct Compensation Property Damage claims, and how it is determined. 1

81 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Contents Introduction Saskatchewan Summary of Coverage Loss Situations Manitoba Summary of Coverage Loss Situations British Columbia Summary of Coverage Loss Situations Alberta, Newfoundland, Nova Scotia, and Prince Edward Island Summary of Coverage Loss Situations New Brunswick Summary of Coverages Loss Situations 2

82 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND Introduction Crown corporations Saskatchewan, Manitoba, and British Columbia have government-operated automobile insurance plans. A Crown corporation operates each plan in a manner similar to any other insurance company. There are some differences, of course. A major one is that they are the sole providers of certain basic coverages within the province of operation. However, their main objective is the same as that of private insurers to protect automobile owners and drivers, as well as innocent third parties, against losses arising out of automobile accidents. Standard automobile policies (such as the SPF 1) have sections that deal with details about the people and vehicles insured, insuring agreements, coverages, provisions, definitions, exclusions, and statutory conditions. They specify all the contractual obligations and rights of the insured and the insurer. These sections are based on provisions set out in legislation such as provincial Insurance Acts and Motor Vehicle Acts. Where government automobile insurance plans exist, a standard automobile policy is not issued for the basic coverages, although an information booklet describing the coverage provided may be given to insureds. Coverage is enshrined in legislation such as provincial Insurance Acts and Motor Vehicle Acts and specific Automobile Insurance Acts supplemented by detailed Regulations. The provincial legislation regulating automobile insurance specifies the basic coverage limits and deductibles, where applicable, that must be carried by every motorist. When individuals apply for their vehicle registration they automatically must purchase basic insurance at the same time. The registration documents and driver s licence identify the insured and the vehicle(s). A policy is not required as the Regulations serve the same purpose as a policy. Additional coverages, including higher limits and lower deductibles, may be purchased from the government insurer or from private insurers. When such coverages are purchased from private insurers, a policy similar to the standard automobile policy will be issued. Such policies may be referred to as extension policies, or optional insurance policies. In Manitoba, no policy is issued if the additional coverages are purchased from the government insurer. In Saskatchewan and British Columbia both private insurers and the government insurer issue extension policies. This study provides a brief review of automobile insurance in Saskatchewan, Manitoba, and British Columbia, including a summary of the basic compulsory coverages. Extension insurance is also discussed, including a brief description of 3

83 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) the additional coverages available and from whom. The examples illustrate how the coverages apply in various loss situations and how the issue of fault influences claim settlement. Province Plan Basic Coverage Saskatchewan Auto Fund Third Party Liability Personal Injury Comprehensive Manitoba Autopac Third Party Liability Personal Injury All Perils British Columbia Autoplan Third Party Liability Accident Benefits Uninsured Motorist Saskatchewan Saskatchewan was the first province to develop a government insurance plan when the Automobile Accident Insurance Act was introduced in It is administered on behalf of the government by Saskatchewan Government Insurance (SGI), a Crown agency. Licence plate insurance Act in place of policy An insurance premium is payable on every motor vehicle licence at the time the licence plate is purchased. It is referred to as licence plate insurance. A premium is not paid on the driver s licence. However, if a driver is involved in an accident while operating a vehicle, which the operator does not know is improperly licensed, his or her driver s licence will provide insurance to the extent of the basic provincial requirements. Drivers who are deemed to be disproportionately hazardous pay more based on their accident records and traffic violations. No policy is issued under the Act as it defines the coverage, who is insured, the insuring agreements, and insurable risks. The Regulations under the Act make it possible to make certain changes without an act of legislature. Such things as premiums, deductibles, refunds, and rating units may be set or varied. The Regulations can be compared to endorsements which may attach to a policy, and as such, are designed to facilitate coverage and permit a wider scope of variations in underwriting. The Automobile Accident Insurance Act is the master policy and the registration certificate and driver s licence are proof of insurance. Summary of Coverage Basic compulsory coverage consists of Third Party Liability, Personal Injury Benefits, and Comprehensive insurance. 4

84 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND Extension policies No-fault personal injury benefits Choice in accident benefits coverage Increased limits and reduced deductibles may be purchased through SGI Canada or through private insurers by means of extension policies. The Personal Injury Protection Plan (PIPP), a no-fault personal injury benefits plan now referred to as the No-Fault Plan, came into effect on January 1, It provides substantial limits for income replacement; rehabilitation coverage; medical, travel, and personal expenses; living assistance; permanent impairment payments; and death benefits and funeral expense payments. It limits the right to sue a third party motorist to recover such expenses to amounts in excess of the limits provided by the Regulations. Even higher limits may be purchased from SGI Canada (the fully competitive arm of SGI selling property and casualty insurance products such as home, farm, business, and extension automobile) or from private insurers. In 2004, automobile Accident Benefits were amended in Saskatchewan to create a tort option in addition to the already-existing no-fault option. Saskatchewan residents are now able to choose between the two options. The tort option provides a lower level of defined benefits regardless of fault, and in addition, provides access to the courts for actual financial losses above the level of defined benefits (economic losses) and for non-economic losses, including pain and suffering. The choice of Accident Benefits coverage is not limited to vehicle owners. All Saskatchewan residents 18 years of age or older can choose their coverage, and parents can choose the coverage for their children. While coverage options can be changed at any time, the coverage applicable for any injured person will be the coverage which was in place at the time of the accident. Comprehensive = all perils In Saskatchewan, Comprehensive insurance includes collision and upset, thus making it similar to All Perils coverage under a Standard Automobile Policy. It is subject to a deductible, the amount of which depends on the vehicle class. A brief summary of the basic licence plate insurance and the additional protection available from SGI Canada follows. In some cases, protection not provided by the basic licence plate insurance may be purchased as extension insurance; in other cases limits may be increased or deductibles reduced by purchasing extension insurance. The extension insurance package available from SGI Canada is called Auto Pak. Although private insurers offer similar extensions of coverage, there may be some variations among them. Also, the majority of private insurers do not provide the personal injury benefits under their extension insurance. SGI provides basic licence plate insurance. SGI Canada is the competitive arm of SGI and provides extension insurance. 5

85 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Summary of Compulsory Automobile Coverage in Saskatchewan Coverage Basic plate insurance Auto Pak extension coverage Third Party Liability $200,000 Options of $1 million $2 million Comprehensive Bodily Injury Benefits (no-fault option) Bodily Injury Benefits (tort option) Covers collision, upset, and damage caused to the vehicle by specified perils, such as, theft and vandalism. Coverage is subject to a deductible, the amount of which depends on the class of vehicle covered. Includes the following coverages, which are subject to various limits and conditions: income benefits rehabilitation coverage medical, travel, and personal expenses living assistance permanent impairment payments death benefits and funeral expenses Benefit limits are indexed. Coverage limits under the no-fault option are greater than under the tort option, however, the insured s right to sue is severely limited. Includes the following coverages, which are subject to various limits and conditions income benefits medical and rehabilitation coverage permanent impairment payments death benefits and funeral expenses Coverage limits are lower than under the no-fault option, because an injured person not responsible for the collision can sue those responsible for expenses above the package of benefits and for pain and suffering. Insured can purchase lower deductibles. Auto Pak will pay amounts in addition to those received under basic plate insurance for the following: income benefits spousal death benefits education allowance funeral expenses Auto Pak will pay amounts in addition to amounts received under basic plate insurance for the following: income benefits spousal death benefits funeral expenses The amount of additional payments under the tort option will be different than under the no-fault option. 6

86 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND Loss Situations Sally and Ken are involved in an intersection accident in Saskatchewan. Both are insured under licence plate insurance for the basic limits of $200,000 Third Party Liability, Personal Injury Benefits (no-fault), and Comprehensive with a $700 deductible. Sally has extension insurance of $1 million Third Party Liability, and a $100 deductible for Comprehensive coverage through Insurer A. Ken has extension insurance of $1 million Third Party Liability, increased limits for Personal Injury Benefits, and a $200 deductible for Comprehensive coverage through SGI Canada Auto Pak extension coverage. Property Damage Claims Example 1 Ken s vehicle suffered $3,000 damage and Sally s vehicle suffered $2,000 damage. To enable both drivers to have their vehicles repaired quickly, each claimed under the Comprehensive section of their own policy. Payments would be apportioned as follows: Sally Paid by SGI under Comprehensive $1,300 ($2,000-$700 deductible) Paid by Insurer A under Comprehensive $600 ($700-$100 difference between deductibles) Total recovery $1,900 Ken Paid by SGI under Comprehensive $2,300 ($3,000-$700 deductible) Paid by SGI Canada under Comprehensive $500 ($700-$200 difference between deductibles) Total recovery $2,800 Example 2 Suppose in this accident, no injuries occurred, but Sally was found to be 100 percent at fault. Sally would still recover $1,900 as per Example 1, but Ken s recovery would total $3,000, apportioned as follows: Ken Paid by SGI under Comprehensive $0 Paid by SGI Canada under Comprehensive $0 Paid by SGI under Sally s Third Party Liability coverage $3,000 7

87 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Bodily Injury Claim Example 3 Sally suffered very little injury but Ken, a prominent surgeon, has suffered extensive injuries and developed a tremor in his right hand. He may not operate again for a long time, if ever. How will automobile insurance respond? Ken may first claim under his personal injury benefits (income benefits) under the basic compulsory coverage which will pay up to a certain limit. His SGI Canada extension policy will pay an additional amount of income benefits up to its limit. This payment will be paid for life or be reduced proportionately should Ken be able to work full or part-time at a later date. He will also receive rehabilitation benefits under his personal injury benefits of his compulsory government insurance to assist in his return to employment. Some private insurers do not provide the personal injury benefits under their extension insurance. If Ken had a policy with a private insurer not providing the personal injury benefits, then he might be able to sue Sally for his financial loss in excess of the limit of his income replacement coverage under the basic license plate insurance. Although the compulsory government insurance plan covers both motorists and one of them is also insured by the government extension plan, this has no effect on what the insureds ultimately recover. One insured may sue another in certain circumstances and although they are both covered by the same insurer, they will be paid according to what the court awards. If Ken had the tort option of personal injury benefits, the limit of coverage under the income replacement benefit would be lower, but he could sue Sally to recover his damages since she is responsible for the accident. He could also sue for non-economic loss (pain and suffering). Manitoba Autopac The Manitoba Public Insurance Corporation Act implemented the automobile insurance plan known as Autopac in It is administered by Manitoba Public Insurance (MPI) which is a Crown agency. In March 1994, Manitoba implemented a no-fault system of automobile insurance called the Personal Injury Protection Plan (PIPP). Summary of Coverage The basic compulsory coverage consists of minimum limits of Third Party Liability Coverage, Personal Injury Protection, and All Perils Physical Damage Coverage. Under All Perils coverage, different deductibles may apply to different 8

88 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND classes of vehicles, and deductible amounts are paid in proportion to the degree of responsibility assessed for an accident. Also, specified classes of vehicles may be excluded from All Perils coverage. Act & Regulations in place of policy Rating Premium Extension insurance Motorists may register and insure their vehicles at any Autopac agent s office. A policy is not issued for the basic plan. The insuring agreements, conditions, and limitations are set out in Regulations made under the Manitoba Public Insurance Corporation Act. The motor vehicle registration card serves as proof of insurance. Autopac has a merit discount program to encourage motorists to drive more carefully and reward those with a proven history of claim-free driving. For various consecutive calendar years of claim-free driving motorists are given stated percent discounts on their premiums one year of claim-free driving means a 5 percent discount, five years means a 25 percent discount, and so on. On the other hand, motorists who have accidents are required to pay premium surcharges as set out in the Regulations. A basic insurance premium is charged on every Manitoba driver s licence. Drivers may earn merit points that will be used to discount premiums. Demerit points for such things as accidents and major traffic convictions will result in premium surcharges. Extension insurance to increase limits or reduce deductibles may be purchased from Autopac or from private insurers. In Manitoba, when such coverages are acquired from the government insurer the coverages selected by the insured are identified on the registration documents and the additional premium is charged. No policy is issued. When such coverages are purchased from private insurers, a policy similar to the Standard Automobile Policy is issued. Right to sue Payments under the PIPP do not preclude an injured person from bringing lawsuit against a third party who is from outside of the province. Lawsuits are also permitted when a vehicle that is not covered under Autopac, such as a snowmobile, is involved in a loss. 9

89 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Summary of Compulsory Automobile Coverage in Manitoba Coverage Basic Autopac Optional Autopac Third Party Liability $200,000 Options of $1 million $2 million $5 million All Perils Personal Injury Protection Plan Covers collision, upset, and damage caused to the vehicle by specified perils, such as, theft and vandalism. Coverage is subject to a limit per vehicle and a deductible. Amount of deductible depends on the type of vehicle covered. Includes the following coverages, which are subject to various limits and conditions: medical and personal expenses income replacement caregiver expenses personal assistance impairment rehabilitation death payments Basic benefits amounts are adjusted each year based on either the Consumer Price Index or the Manitoba Average Industrial Wage. Insured can purchase excess value insurance if the limit per vehicle is too low. Insured can purchase lower deductibles. Not available However, increased limits may be available from private insurers. Loss Situations Kay and Paul are involved in an intersection accident in Manitoba. Both are insured for basic limits under the compulsory government plan, consisting of $200,000 Third Party Liability, Personal Injury Benefits, and All Perils with a $500 deductible. Kay has extension insurance through Insurer A for $1 million Third Party Liability and a $100 All Perils deductible. Paul has extension insurance through MPI for $1 million Third Party Liability and a $200 All Perils deductible. 10

90 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND Property Damage Claims Example 1 Paul s vehicle suffered $3,000 damage and Kay s vehicle suffered $2,000 damage. To enable both drivers to have their vehicles repaired quickly, both claimed under the All Perils section of their own policy. Payments would be apportioned as follows: Kay Paid by MPI under All Perils $1,500 ($2,000-$500 deductible) Paid by Insurer A under All Perils $400 ($500-$100 difference between deductibles) Total recovery $1,900 Paul: Paid by MPI under All Perils $2,500 ($3,000-$500 deductible) Paid by MPI under All Perils $300 ($500-$200 difference between deductibles) Total recovery $2,800 Example 2 If both drivers are found to have been equally at fault in this accident, 50 percent of Kay s remaining $100 deductible will be paid by MPI under Third Party Liability on behalf of Paul, and 50 percent of Paul s remaining $200 deductible will be paid by MPI under Third Party Liability on behalf of Kay. Bodily Injury Claim Example 3 Kay suffered very little injury, but Paul, a prominent surgeon, has suffered extensive injuries and developed a tremor in his right hand. He may not operate again for a long time, if ever. How will automobile insurance respond? Paul may claim under the Personal Injury Protection Plan under basic Autopac, which will pay an income replacement benefit subject to a maximum limit. This payment will be paid for life or be reduced should Paul be able to work full or part-time at a later date. He will also receive rehabilitation benefits under the Personal Injury Protection Plan to assist in his return to employment. Unless Paul has purchased additional income protection from a private insurer, this is all he will receive even though his income may have been much higher than the limit of coverage available under the plan s income replacement benefit. He is not permitted to sue Kay even if she was totally or partially responsible for the accident. 11

91 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) British Columbia Autoplan In British Columbia, the Insurance Corporation of British Columbia (ICBC or Corporation) is the sole provider of the mandated basic automobile insurance coverage known as basic Autoplan. It also provides driver licensing, vehicle licensing, and vehicle registration services on behalf of the provincial government. The Corporation was set up when the Insurance Corporation of British Columbia Act was passed in At the same time, the Automobile Insurance (Motor Vehicle) Act was passed to set up Autoplan. Vehicle owners must purchase basic Autoplan insurance when they purchase vehicle license plates. However, certain vehicles are exempt from Autoplan. The legislation governing Autoplan has been revised at various points since then, and the plan is currently governed by the Insurance (Vehicle) Act and Insurance (Vehicle) Regulation. Act & Regulations in place of policy Basic compulsory coverage Basic premium Optional insurance There is no policy issued for basic Autoplan coverage. The vehicle registration serves as evidence of insurance, and the licence plate number serves as the ICBC policy number. The insuring agreements and conditions are outlined in the Insurance (Vehicle) Regulation. Higher Liability limits, higher Accident Benefits limits, and Physical Damage coverage may be purchased from ICBC or from private insurers. In British Columbia, liability of vehicle owners or operators to their passengers is based on ordinary negligence whether the passenger is carried for compensation or gratuitously. Summary of Coverage Basic Autoplan covers the owner of the insured vehicle and any other authorized licensed driver for basic limits of Third Party Liability coverage and provides nofault Accident Benefits. Claimants must first accept or waive no-fault Accident Benefits available before exercising their tort right under the coverage. Vehicle owners are charged a basic premium when they register their vehicle. Owners may earn discounts to this basic premium for each year of driving without an at-fault claim. However, owners that have an at-fault or chargeable claim may lose all or part of their discount or be required to pay a surcharge. Optional insurance to increase limits, cover physical damage to the vehicle, or cover additional perils and exposures may be purchased from Autoplan or from private insurers. When such coverages are purchased from ICBC, the Autoplan Optional Policy is issued. When purchased from private insurers, a policy similar to the standard automobile policy is issued. 12

92 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND Summary of Compulsory Automobile Coverage in British Columbia Coverage Basic Autoplan Optional coverages Third Party Liability $200,000 The rules are different for buses, taxis, limos, or heavy commercial vehicles Optional coverage available between $300,000 and $5 million Physical Damage coverage for vehicle Accident Benefits Loss Situations Not available Includes the following coverages, which are subject to various limits and conditions: medical and rehabilitation expenses wage loss and homemaker disability benefits death and funeral benefits Insured can purchase various types of physical damage coverage with a choice of deductibles. Not available Mary and Larry are involved in an intersection accident in British Columbia. Both are insured under basic Autoplan for Accident Benefits and Third Party Liability coverage with a $200,000 limit. Larry has also purchased optional coverage from ICBC including an increased Third Party Liability limit of $500,000, and Collision coverage with a $300 deductible. Property Damage Claims Example 1 Liability for the accident is split and Mary is 60% liable, while Larry is 40% liable. Damage to Mary s vehicle is $800. Damage to Larry s vehicle is $1,200. Insurance will be apportioned as follows: Mary Paid by Autoplan under Third Party Liability $320 (40% of the damage to her vehicle since she was 60% at fault) Total recovery $320 Since she has no Collision coverage, she will not receive anything else to cover the damage. Larry Paid by Autoplan under Third Party Liability $720 (60% of the damage to his vehicle since he was only 40% at fault) Paid by Autoplan under Collision $360 ($480 less his 40% of his $300 deductible) Total recovery $

93 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Body Injury Claim Example 2 Mary suffered very little injury, but Larry, a prominent surgeon, has suffered extensive injuries and developed a tremor in his right hand. He may not operate again for a long time, if ever. How will automobile insurance respond? Larry may claim under basic Autoplan s Accident Benefits, which will pay a wage loss disability benefit subject to a maximum weekly limit. This benefit will be paid as long as the disability lasts or until he reaches age 65, whichever comes sooner. He will also receive medical and rehabilitation benefits to assist in his return to employment. Lawsuits are permitted in British Columbia for injuries arising from automobile accidents. Before Larry can sue Mary, he must first exhaust all the coverage to which he is entitled under Accident Benefits or waive his claim under Accident Benefits. If he exhausts his coverage under Accident Benefits, sues Mary, and is awarded an amount, it will be paid by Autoplan on behalf of Mary (under Mary s Third Party Liability coverage). But the Accident Benefits that Larry has already received will be deducted from the amount paid. If Larry waives the Accident Benefits, sues, and loses his action, he will be paid nothing. Alberta, Newfoundland, Nova Scotia, and Prince Edward Island Tort-based systems Alberta, Newfoundland, Nova Scotia, and Prince Edward Island all have tortbased systems of automobile insurance operated entirely by private sector insurance companies. Tort-based systems compensate persons based on fault and provide victims with access to the civil justice system to recover damages. Definition A tort is a civil wrong or harm committed against another. The injured party has a right of action against the wrongdoer. Third Party Liability Coverage Automobile Third Party Liability insurance covers the at-fault driver for the legal costs of being sued and pays for damages awarded to the victim, subject to certain conditions contained in the policy. (In cases where the at-fault driver is uninsured, the victim may be eligible for other forms of compensation, such as Uninsured Motorist coverage discussed elsewhere in this textbook.) The amount paid by Third Party Liability insurance depends on the extent that the driver is found to be responsible for the accident. If the driver is found to be 100% at fault (and the victim is 100% not-at-fault), then the victim is entitled to recover 100% of his vehicle damage from the at-fault driver. Damage to the at-fault driver s vehicle will only be covered if he has purchased optional Own Damage coverage, such as Collision or All Perils. 14

94 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND In situations where fault is split, drivers will be compensated by the other driver s Third Party Liability coverage to the extent that they were not-at-fault. The remainder of their vehicle damage will be covered under their Own Damage coverage, if they have purchased it. Example Victor and Michael are involved in a collision in an intersection. Victor is determined to be 30% at fault and Michael is determined to be 70% at fault. Victor will be compensated for 70% of his vehicle damage by Michael s insurer under Third Party Liability coverage. Victor will be compensated for the remaining 30% of the damage by his own insurer, under Collision coverage. If he does not have Collision coverage, than he will not be compensated for the remainder of the loss. Michael will be compensated for 30% of his damage by Victor s insurer under Third Party Liability coverage. The remaining 70% of his damage will be paid by his own insurer under Collision coverage. However, in some cases, it can take a considerable amount of time to establish who was at fault for an accident, especially in cases where fault is disputed or the evidence is not clear-cut. In these instances, instead of waiting for fault to be established, an insured can elect to have his vehicle damage repaired under his own policy if he has purchased optional Own Damage coverage. If he is later found to be not-at-fault, his insurer can seek reimbursement from the at-fault driver or the at-fault driver s insurer. The innocent insured can also seek reimbursement of his deductible from the at fault driver. Example Victor and Michael are involved in a collision in an intersection. They have given conflicting reports to their insurers, and both claim to be innocent. Their insurers are working to establish fault, but it may take some time. Victor would like his vehicle repaired as soon as possible. He is covered for basic limits of all the mandatory coverages under the SPF 1, and has purchased Collision coverage with a $300 deductible. Victor can look to his own insurer to recover for his vehicle damage. He will be compensated under his Collision coverage for the full amount of his vehicle damage, with the exception of his $300 deductible. When fault is later established, and Victor is found to be 70% not-at-fault, he can claim against Michael to recover $210 (70% of his deductible). His insurer can seek reimbursement from Michael for 70% of the amount it paid to fix Victor s vehicle. 15

95 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Summary of Coverage The Standard Policy Form (SPF 1), or Owner s Policy, is the approved form for insuring the majority of automobile risks in Alberta, Newfoundland, Nova Scotia, and Prince Edward Island. Other standard policies exist for special purposes, such as the Garage Automobile Policy (SPF 4). Standard endorsement forms (SEF) are available to make any necessary changes to the policy. The endorsements are named according to their purpose and have a corresponding number, for example the SEF 16 Suspension of Coverage endorsement. A standard application form (SAF) is used for collecting the necessary information to underwrite and issue a policy. For example, the SAF 1 is used to apply for an Owner s Policy, while the SAF 4 is used to apply for a Garage Automobile Policy. Although these standard forms bear the same numbers in each of the provinces, there are some variations in wording and coverage between provinces. Third Party Liability mandatory Accident Benefits Third Party Liability coverage is mandatory in Alberta, Newfoundland, Nova Scotia, and Prince Edward Island, and insureds are required to have coverage that meets or exceeds the minimum compulsory limits. In Alberta, Newfoundland, and Prince Edward Island, the minimum Third Party Liability limit is $200,000. In Nova Scotia, the minimum limit is $500,000. Third Party Liability limits may be increased to various amounts for an additional premium. However, underwriting considerations could limit such amounts. Accident Benefits are also mandatory in all of these provinces except Newfoundland. The Accident Benefits consist of modest amounts that are set out in the policy or separate schedules. Various limits apply. In Nova Scotia, insurers are obligated to offer optional supplementary Accident Benefits in the same form as the mandatory Accident Benefits, but with increased limits or durations. Additional premium may apply to these benefits. Benefits under this part of the policy are paid on a no-fault basis. Coverage comprises several separate sub-sections: Medical, rehabilitation, and funeral expenses Death benefits and loss of income payments Supplemental benefits respecting accidents occurring in Quebec (This last item is not applicable to Nova Scotia.) Uninsured Motorist Coverage In Alberta, Uninsured Motorist coverage is provided under Section B Accident Benefits Subsection 3. 16

96 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND Own damage Insureds have the option of purchasing Own Damage coverage based on their needs. Deductibles apply to all sections although they do not apply to losses resulting from fire, lightning, or theft of the entire vehicle. There is a choice of deductibles. All policies are subject to Statutory Conditions as set out in each province s Insurance Act. General provisions, definitions, and exclusions further define coverage. Summary of Coverage Third Party Liability Policy Section A Mandatory Accident Benefits Section B Mandatory except in Newfoundland Own Damage All Perils Collision Comprehensive Specified Perils Uninsured Motorist Section C Section D (In Alberta: Section B Accident Benefits Subsection 3) Optional choice of coverages Mandatory Loss Situations Marie and her son are returning from a ski weekend. The weather has turned stormy and road conditions have deteriorated. Marie loses control of the vehicle and hits the guardrail. Both are injured and require hospitalization. Marie, who is a dentist, will miss several months of work because she has suffered a dislocated shoulder and broken right hand. Her son, who is a full-time student, will miss three weeks of classes from university. The vehicle damage is $7,500. How will insurance respond? She is insured for $500,000 Third Party Liability, Accident Benefits, and All Perils with a $100 deductible. Property damage claims Example 1 Marie would claim under her All Perils coverage and she would receive $7,500 less $100 (deductible) = $7,

97 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Bodily injury claims Example 2 Both can claim against Marie s insurer for any medical and rehabilitation expenses that are not otherwise covered by provincial medical plans. Marie can claim for loss of income benefits, subject to policy maximum limits, for the time she is unable to work. Her son would only be able to claim for loss of income if he has a part-time job. Two-car collision, property damage claim Example 3 Suppose this was a two-car collision. Sanjay is speeding in spite of the slippery roads, he loses control of his vehicle, veers into Marie s path, and the two collide. Police place 100 percent liability on Sanjay because he was driving too fast for the existing road conditions. Marie could claim under her All Perils coverage and receive $7,400. She would then claim against Sanjay for her $100 deductible. Her insurer will seek reimbursement from Sanjay or his insurer for its outlay as well. Two-car collision, bodily injury claim Example 4 Same situation as in example 3 Marie and her son will again claim under her own policy. However, if their injuries are severe and they exhaust the benefits under their own coverage and/or their loss of wages is greater than what can be recovered under their own coverage, they may also claim against Sanjay or sue him in order to try to make a full recovery of all expenses and losses resulting from the accident, including amounts for pain and suffering. New Brunswick Summary of Coverage Automobile insurance in New Brunswick is also operated entirely through the private sector. There is a mandatory minimum Third Party Liability limit of $200,000 and minimum standards for mandatory Accident Benefits. Coverages under the New Brunswick SPF 1 are the same as those outlined in the previous chart for Alberta, Newfoundland, Nova Scotia, and Prince Edward Island, except that in 2005, New Brunswick introduced mandatory Direct Compensation Property Damage (DCPD) coverage. This coverage is provided under Section A1 of the New Brunswick SPF 1 policy. 18

98 17 SASKATCHEWAN, MANITOBA, BRITISH COLUMBIA, ALBERTA, NEW BRUNSWICK, NEWFOUNDLAND, NOVA SCOTIA, AND PRINCE EDWARD ISLAND New Brunswick s mandatory DCPD coverage is very similar to the mandatory DCPD coverage in Ontario. Under DCPD, New Brunswick insureds are indemnified for property damage by their own insurer to the extent they were notat-fault in the accident. Fault determination Section A1 - DCPD Fault is determined in accordance with the Insurance Act and legislated Fault Determination Rules. These depict various possible accident situations and set out rules for apportioning liability. Losses are settled according to these rules. If insurers and insureds are not able to come to an agreement about the fault determination, insureds may take action against their own insurer and let the courts decide the matter. Coverage under DCPD applies if: a) An automobile or its contents, or both, suffers damage arising directly or indirectly from the use or operation in New Brunswick of one or more other automobiles; b) The automobile that suffers the damage (or in respect of which the contents suffer damage) is insured under a motor vehicle liability policy issued by an insurer that is licensed to undertake automobile insurance in New Brunswick, or an insurer that has filed an undertaking with the New Brunswick Superintendent of Insurance to be bound by this section of the New Brunswick Insurance Act; and c) At least one other automobile involved in the accident is insured under a motor vehicle liability policy issued by an insurer that is licensed to undertake automobile insurance in New Brunswick, or an insurer that has filed an undertaking with the New Brunswick Superintendent of Insurance to be bound by this section of the New Brunswick Insurance Act. If the policy contains a DCPD deductible, the insurer s liability is limited to the amount of loss exceeding the deductible stated on the insurance application, multiplied by the percentage to which the driver of the automobile was determined to be not-at-fault. Loss Situations Property damage claim Example 1 Mike and Olivia are involved in an intersection accident in New Brunswick. Mike is covered by insurer A and Olivia is covered by insurer B. Mike and Olivia are both 50% at fault and neither has Collision coverage. If collision damage to Mike s vehicle is $1,000 and collision damage to Olivia s vehicle is $800, each will make a claim under DCPD coverage. Payments will be apportioned as follows: 19

99 C14 AUTOMOBILE INSURANCE PART 1 (ONTARIO) Mike Paid by insurer A under DCPD coverage $500 ($1,000 x 50% since he was 50% at fault) Total recovery $500 Olivia Paid by insurer B under DCPD coverage $400 ($800 x 50% since she was 50% at fault) Total recovery $400 Example 2 For the above loss, if Mike is found 100% at fault and Olivia is found 0% at fault, payments would be apportioned as follows: Mike Paid by insurer A under DCPD coverage $0 (Mike is 100% at-fault so is not eligible to make a claim under DCPD) Total recovery $0 Olivia Paid by insurer B under DCPD coverage $800 ($800 x 100% since she is innocent) Total recovery $800 Example 3 Where both Mike and Olivia are 50% at fault and both have Collision coverage with a $500 deductible, payments will be apportioned as follows: Mike Paid by insurer A under DCPD coverage $500 ($1,000 x 50% since he was 50% at fault) Paid by insurer A under Collision coverage $250 ($500 less 50% of his $500 deductible) Total recovery $750 Olivia Paid by insurer B under DCPD coverage $400 ($800 x 50% since she was 50% at fault) Paid by insurer B under Collision coverage $150 ($400 less 50% of her $500 deductible) Total recovery $550 20