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Here's why "no fault" insurance is a misnomer

Published on Wednesday, 30 November 2011

Last week, I wrote about what to do if you’re ever in a car crash. Today, I want to describe the automobile insurance system in Ontario and how it works.

Although the current insurance system (often referred to as “no-fault”) has its supporter and detractors, the purpose of this column is not to make the case either for or against it, but rather to provide a broad overview and to promote discussion.

In 1990, the provincial government introduced a new type of insurance system for automobile accidents. It was introduced as a way to speed up the claims process and to prevent injured people from suing motorists who caused the crashes.

More: Was this driver a victim of insurance fraud?

More: 10 things to remember if you’re ever in a car crash

It was also promoted as a more efficient method of dealing with the increasing number of auto accidents and the sharp increase in auto insurance premiums, prior to 1990.

Since then, various governments have introduced changes to this type of insurance system in an attempt to make it fairer for insurance providers and insured motorists.

The name “no-fault” insurance implies that nobody is at fault when an accident occurs. But it’s a misnomer. The term means that when an accident occurs, each party involved reports the accident to their own insurance company, regardless of who is at fault.

Their own insurance company will pay for the damages and entitled benefits, even if the accident was the fault of the other driver. If you are entirely at fault, your insurance company will pay for your damages and entitled benefits, and you will likely be subjected to an increase in future premiums.

To determine who is at fault or responsible for the purposes of direct compensation and property damage, insurance companies will often refer to the Ontario Fault Determination Rules. These rules apply to most collision scenarios regardless of weather conditions, point of impact on the vehicle or the involvement of pedestrians.

The circumstances of a crash could show that more than one driver was negligent. If so, each insurance company could get involved in the settlement, depending on the degree of responsibility attributed to each driver. In cases where a dispute arises about responsibility, the courts may be called upon to intervene.

Under the current insurance system, accident victims can still sue a driver who caused a crash. This is known as a “tort” action, and in certain situations accident victims can sue for non-economic losses, in addition to any damages or benefits that their insurance provider pays out.

One of the big differences between the tort system and current insurance is that the latter does not cover non-economic losses, which include items such as pain and suffering, and emotional distress.

Unlike in the tort-based system prior to 1990, nobody except the most severely injured now receives pain and suffering compensation under the current “no-fault” system.

For motorists involved in an automobile accident, it’s critical that they report the crash to their insurance company as soon as possible (and to the police if the damages exceed $1,000). Failure to notify your insurance company could result in losing out on some benefits and any monetary damages to which you are entitled.

Anyone injured in an automobile accident in Ontario is entitled to benefits from their insurance company, regardless of who is at fault. The Ontario Insurance Act stipulates that coverage is mandatory for all auto insurance policies.

Under the current insurance system, motorists involved in an auto accident may qualify for several types of accident benefits, regardless of who is at fault. These benefits are included in the following categories:

  • Medial / rehabilitative
  • Income replacement
  • Caregiver
  • Housekeeping / home maintenance
  • Attendant care
  • Funeral expenses and death benefits

Twenty-one years after it was introduced in Ontario, the current insurance system continues to evolve. For more information, visit the Insurance Bureau of Canada’s website (www.ibc.ca).

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