No-fault insurance sounds like an excellent idea, but not everyone understands how it works. Contrary to what most people believe, it does not mean you can never be found liable for an accident. It means drivers can claim compensation from their insurer for their medical expenses, regardless of fault. The idea is to speed up the claims process and avoid slow-moving civil lawsuits.
Saskatchewan was the first Canadian province to enact a no-fault automobile insurance law with the Automobile Accident Insurance Act 1946. Interestingly, the reason for its enactment was not to speed up the claims process. Instead, the goal was to provide residents with a bit more compensation for their injuries in car accidents.
However, times have changed, and litigation costs have risen exponentially. Some Canadian provinces have enacted their versions of no-fault insurance laws to solve the issues with the tort insurance system.
How a No-Fault System Works
Suppose a car accident in Ontario results in injuries and proper damage. Under the tort system, the at-fault driver or their insurer will be responsible for the other parties’ losses. The victims can file an insurance claim or take civil action, such as a personal injury lawsuit.
However, it can take time to establish fault, even with the help of experienced lawyers. The resulting delay in compensation can subject victims to financial distress.
Under the no-fault system, all drivers turn to their insurers for reimbursement for losses resulting from an insured risk, regardless of fault. The insurance typically covers bodily injuries, which is why another term for it is Personal Insurance Protection. Coverage includes medical expenses and loss of income up to policy limits. Provinces that mandate no-fault insurance require minimum coverage for these losses.
Generally, no-fault insurance does not cover pain and suffering. Additionally, most provinces restrict the victim’s ability to sue for non-economic damages except under specific circumstances. For example, Section 267.5(5) of the Ontario Insurance Act allows victims with permanent and severe injuries to sue for damages.
What about damage to your car? That’s a hitch in the no-fault system affecting motorists in Canadian provinces. One of the mandatory coverages for no-fault areas is direct compensation property damage (DCPD), which covers property damage.
However, your insurer will only pay if you are not at fault. If you contributed to the accident, your compensation is directly proportional to your degree of responsibility. For example, suppose you are 25 percent at fault for the accident. Your insurer will only cover 75 percent of the costs to repair your vehicle.
Moreover, your insurer will determine fault based on provincial rules like Regulation 668 of Ontario’s Insurance Act. The police report is important, but it is not the final word. It cannot supersede the insurance company’s findings.
Finally, fault determined under the no-fault system does not affect any benefits you receive. However, it may affect the premiums you pay in the future.
No-Fault Insurance Provinces
Six provinces in Canada use a variation of the no-fault insurance system. Below are the minimum requirements for each province. However, it is typically better to get more than that.
Ontario
Ontario requires drivers to have a minimum of $200,000 in third-party liability, accident benefits, DCPD, and uninsured automobile coverage. Beginning January 1, 2024, vehicle owners may opt out of DCPD coverage.
Nova Scotia
The minimum coverage for mandatory auto insurance in Nova Scotia is $500,000. These include third-party liability, accident benefits, DCPD, and uninsured/unidentified automobile coverage.
New Brunswick
New Brunswick vehicle owners must have a minimum of $200,000 in auto insurance coverage. These include third-party liability, DCPD, accident benefits, and uninsured automobile insurance.
Québec
Québec has a public no-fault auto insurance plan administered by the Société de l’assurance automobile du Québec (SAAQ). It covers all Québecers for bodily injury and death resulting from an accident. The physical injury coverage premium is part of the cost of their driver’s licenses. However, Québec also requires vehicle owners to obtain a minimum of $50,000 in civil liability from a private insurer.
Prince Edward Island
Drivers in Prince Edward Island must carry a minimum of $200,000 in auto insurance. These cover third-party liability, DCPD, accident benefits, and uninsured automobile coverage.
British Columbia
Alistair Vigier, the CEO of Clearway, says that “British Columbia requires drivers to obtain the Basic Autoplan from the government insurer, the Insurance Corporation of British Columbia (ICBC). It includes $200,000 in third-party liability, $200,000 in vehicle damage, and $1 million per person in underinsured motorist protection.”
Saskatchewan
Saskatchewan drivers must obtain a minimum of $200,000 in no-fault auto insurance from the Saskatchewan Government Insurance (SGI). It covers third-party liability and basic auto damage insurance, the premium of which is part of your vehicle registration fees. It also includes Accident Benefits unless you choose tort coverage.
Interestingly, Saskatchewan is the first province to use the no-fault insurance system. Still, drivers today can opt out of it. They can choose tort coverage, allowing them to sue for non-pecuniary damages in a negligent accident. In that case, they can get legal help from Clearway Law, a legal directory of competent lawyers in Canada.
Additionally, drivers must file a declaration or withdrawal for tort coverage form with SGI to switch.
Takeaways
No-fault insurance has many benefits for victims of car accidents who sustain injuries. The main advantage is the speedy release of compensation for monetary damages and dealing only with one insurer. It also reduces the need for litigation.
However, it has its drawbacks. You cannot claim full compensation for property damage if you are at fault. It also limits your ability to sue for pain and suffering.
Overall, no-fault insurance in Canada works as intended in most cases. It only requires vehicle owners and drivers to understand the basic parameters of the system to take advantage of it.
