Auto Insurance > Unique Insurance Coverage

An interesting recent article in The Lawyers Weekly by Eric Knutsen entitled, “Auto Insurance as a Social Contract.”  Mr. Knutsen begins his article as follows:

Automobile insurance in Canada is a product with a decidedly public purpose. It is a driver-funded source of compensation for motor vehicle accident victims – one of the important foundations of Canada’s social safety network.

Provincial governments are heavily involved in the regulation and operation of the automobile insurance regime in the interest of the public. This includes drafting and approving insurance policy language, with input from the insurance industry. The public flavour of Canadian automobile insurance should be driving the way courts determine insurance coverage disputes in automobile accidents involving injuries or death. Automobile insurance polices in Canada are not “contracts;” they are public regulatory documents.

The majority of Canadian courts use an ill-fitting, text-centric interpretive framework that relies on a fiction that the automobile insurance policy is a bilateral, private contract – a bargain. Courts employ tools of contractual construction to discern meaning in words as if the insured and insurer themselves bargained over the choice of the language. Yet neither party can bargain over terms of a legislatively approved mandatory automobile insurance policy.

Auto insurance in Ontario (see our background page) is certainly different from other types of traditional insurance.  Several examples of the balancing process inherent auto insurance include:

The Accident Benefits system – this provides a variety of potential insurance benefits to those involved in accident.  This is a “no fault” system, so that even a person who causes a car accident can receive the same amount of Accident Benefits as an innocent party.

Part of the Accident Benefits system is to provide for some medical and rehabiliation benefits, thereby creating a parallel health care system, operating alongside OHIP, for people involved in car accidents.  That is, if you are hurt in a slip and fall accident, you have to rely upon OHIP and any private sources of benefits which you may have (i.e. private extended health benefits through your employer).  If you are involved in a car accident, you have access to benefits under the Accident Benefits system (NOTE: as of September 1, 2010, these benefits are quite limited for the majority of people involved in car accidents, see our Accident Benefits blogs – Part 1, 2, 3, 4, 5, 6, 7, 8 and 9).

The Tort Lawsuit regime – If you are hurt badly and/or suffer significant loss or damage (i.e. inability to work and earn in the same fashion as before your accident), then you may decide to start a tort lawsuit arising from your car accident.  Again, insurance under this context operates under a strict set of parameters, as set out in the Insurance Act and other legislation.

Insurers to offer both Accident Benefits and Tort Coverage – Insurers who wish to offer automobile insurance in Ontario are required to offer both Accident Benefits and tort coverage, so that each insurer generally will bear their proportional share of the overall market cost of file expense.

Loss Transfer Between Auto Insurers – There is an attempt to balance out the respective risks of insurers.  For example, insurers of motorcycles likely are disproportionately at risk to higher expense claims per accident than the industry norm – i.e. a motorcyclist is likely to suffer serious injury even in a ‘minor’ collision.  On the other hand, truckers (i.e. 18 wheelers, dump truck operators, etc) may suffer absolutely no injury, even in a very serious collision.

The industry’s answer to this discrepancy is a loss transfer system designed to balance these risks.  The expenses or loss, in certain circumstances, will transfer between insurers regarding Accident Benefits, which is an exception to the “no fault” rule which applies to accident that do not qualify for loss transfer.

This loss transfer system does not affect the consumer (i.e. accident participant) but is instead a shifting of expense and risk among insurers that are allowed to offer auto insurance in Ontario.
Gregory Chang
Toronto Insurance Lawyer