Chapter 3 - No-fault Concepts Flashcards
What does no-fault mean?
- that claims are settled with an insured without regard for the traditional legal liability concepts
- and that an insured looks to his/her own insurer to recover after suffering a loss
When was no-fault insurance first explored?
- explored by North American academics in late 1920’s to early 1930’s
- but was not actually implemented until later
Who was one of the first auto insurers in North America to offer some form of no-fault coverage?
- Saskatchewan Gov Insurance (SGI), in 1945
Explain what a knock-for-knock agreement is.
- first application of no-fault insurance for vehicle damage, implented by British insurers in England
- each insurer paid for repairs to its own policyholder’s vehicle after a collision, regardless of who was at fault
- if both parties carried physical damage coverage, knock-for-knock agreements resulted in cost savings and ease of settling claims
- if each insurer paid its own insured and did not pursue subrogation, money was saved on:
i) investigation
ii) fault determination
iii) litigation between insurers - recovery was not permitted & signatories to the agreement took the attitude that what was lost in some cases, were gained in others
- agreements were never binding on insured’s, so they could sue if they disagreed
- however, some drawbacks included:
i) some insurers didn’t agree with philosophy of cov
ii) payment of deductibles
iii) fault still had to be determined for premium determination - laid the groundwork for DCPD
What are the aims of earlier plans and of today’s direct comp. plans?
1) less investigation
2) less subrogation activity
3) less litigation
4) speedier settlements for insureds
5) insureds deal only with their own insurer
6) cost savings which result in lower premiums
How do you assign fault?
- fault is considered when claims are settled because insureds are indemnified to the extent they are not-at-fault & premium chargeability
- in Ontario, New Brunswick, Nova Scotia, PEI fault determination rules are used
- Quebec uses the Driver’s Fault Chart
- losses are then settled according to chart/rules
- if insured’s do not agree, they may take action against their own insurer and let the courts decide
Define threshold.
- is the degree of injury a claimant must establish before being allowed to commence a legal action against the responsible party
- it may be a dollar amount or a verbal description of the severity of the injuries that must be suffered to establish this right of action
Explain the concept of threshold.
- insureds can recover from their own insurers for medical bills up to a small limit or threshold
- they cannot sue the at-fault party for amounts up to the limit, but for only amounts above it (including wage losses and general damages)
- lawsuits can be banned unless the injuries meet specific medical criteria
- Manitoba & Quebec have totally banned lawsuits for injury, they are compensated entirely by AB coverage
- even dependants of at-fault drivers who are injured, are entitled to same benefits
Who was the first and second jurisdiction in North America to totally ban lawsuits by motorists & passengers injured in an auto accident?
1) Quebec
- in 1978, gov took over the injury aspect of auto insurance
- now provides benefits for all Quebecers who are injured in auto accidents
- but Quebecers lost their right to sue the at-fault third party, and only small amounts are paid for general damages
2) Manitoba
- on March 1, 1994 implemented a non-fault BI plan called the Personal Injury Protection Plan (PIPP)
- similar to Quebec plan in that it does not permit suits for injury
Explain the Ontario Threshold.
- in 1990, enacted a threshold no-fault plan
- have been amended in 1996, 2003, and 2010
- lawsuits are now allowed for non-economic loss, only when the insured person has:
i) died
ii) sustained permanent serious disfigurement
iii) permanent serious impairment of an important physical, mental, or psychological function
Give a brief history on the no-fault concept for injuries.
- originated in accident and health insurance
- before AB, were offered auto accident policies underwritten in casualty departments and covered:
i) dismemberment
ii) death
iii) loss of sight, etc - these policies offered limited benefits for low premiums
- loss of income cov was not available, but was sold as a rider/policy from life insurers (not restricted to auto)
- AB evolved from medical expense cov which was introduced in late 1940’s
- it provided minimal cov on a no-fault basis for medical expenses for drivers/passengers injured in an auto accident
- in early stages, AB were quite similar in all provinces and provided modest limits that were immediately available to everyone injured in an auto accident
- over time, provs have taken different approaches to AB cov
- in some provs the right to sue has been either removed or limited to specified circumstances
