Chapter 9 Automobile

Question 1

An automobile insurance policy can be purchased to provide coverage for:

Answer 1

• Third-party liability.
• Personal injury without regard to fault (accident benefits).
• Loss of or damage to the insured automobile.

Question 2

Private Insurers

Answer 2

Ontario, the Ontario Automobile Policy: Owner’s Policy (OAP 1) is used to cover automobiles.

Insureds can use several standard endorsement forms (SEFs) to modify the coverages provided by this policy. In Ontario, the endorsements are available under the Ontario Policy Change Forms (OPCFs).

Question 3

Pure No-Fault and Threshold No-Fault Insurance Plans

Answer 3

Quebec and Manitoba and Ontario

Some provinces have implemented “no-fault” automobile insurance plans. While these plans are not all the same, their primary purpose is to provide benefits to persons injured in automobile accidents, regardless of who is at fault.

A pure no-fault plan removes the right of legal action against drivers who cause injury or death to others. Instead, all accident victims (or their legal representatives) may claim compensation from their own insurers. This plan is used in Manitoba and Quebec.

A threshold no-fault plan is used in Ontario. Under this plan, legal action against the responsible party is not permitted unless a certain threshold is exceeded. The threshold requires two conditions that must be met for legal action against the negligent owner/driver (we’ll discuss these later in the chapter, in Section 9.3.6: Fault Determination Rules).

Question 4

Ontario Application for Automobile Insurance: Owner’s Form (OAF 1)

Answer 4

he insurer requires that all questions contained in the application be answered fully. More than one automobile can be insured by the same policy. Also, as this application is used to insure both private passenger and commercial automobiles, it contains questions specific to both uses. For commercially rated vehicles, the applicant must complete a separate commercial/public automobile supplement.

Question 5

OAF Section 1 Name and Postal Address

Answer 5

The information in Section 1: Name and Postal Address is important for various reasons. Before agreeing to provide the applicant with insurance, the insurer will request a driver history (also known as a “driver abstract”) from the provincial licensing body. Errors in providing the driver abstract are less likely to occur when the full name and address of the applicant are provided to the insurer.

The territory in which the automobile will be used has a bearing on the potential for loss. The insurer anticipates that the described automobile is in, and will be chiefly used in, the vicinity of the applicant’s address. If that assumption is incorrect, the applicant must provide all details. The application also requires that both the applicant’s residence and business telephone numbers be stated.

If the automobile being insured is leased, the lessor’s full name and postal address must be provided.

Question 6

OAF Section 2 Policy Period

Answer 6

The coverage begins at the time the application is taken and expires at 12:01 a.m. standard time at the address of the insured. This time and location is important because Ontario has different time zones. If an accident happens at 12:01 a.m. in Ottawa and another one happens simultaneously in Kenora, Kenora’s time of accident will be 11:01 p.m. This critical time difference means one automobile policy just expired, whereas the other has not.

Policies are normally issued for 12 months, meaning they need to be renewed yearly.

Question 7

Section 3: Details of the Described Automobile

Answer 7

• If leased by the applicant: name and address of the lessor.
• If purchased by the applicant: new or used, date, and value (including equipment).
• Name and address of any lienholder or mortgagee.

When completing Section 3: Details of the Described Automobile, the applicant must provide the vehicle’s model, year, make or trade name, body type, cylinders or displacement, gross vehicle weight, and vehicle identification number (VIN).

commuting distance to work (one way), annual driving distances, details of any carpooling, type of fuel (gas or diesel), and disclosure of any unrepaired damages. Any modifications — such as non-factory wheels, electronic equipment, or fancy paint alterations — must be added to the Remarks section.

The policy contains exclusions for certain uses of the vehicle. The applicant must indicate if the vehicle is being rented or leased, carrying passengers for compensation or hire, hauling a trailer, or carrying explosives or radioactive materials. If the answer to any of these questions is “yes,” the applicant may require additional coverage by endorsement.

The final question asks for the total number of automobiles in the household. This includes vehicles belonging to other household members (for example, vehicles belonging to the applicant’s children or company-supplied vehicles).

Question 8

Section 4: Driver Information

Answer 8

Automobile insurance policies permit the use of the automobile by persons not named on the policy. Section 4: Driver Information is designed to identify anyone who will regularly or occasionally use the insured automobile.

The applicant is required to provide the following information:

• Names of all drivers (as shown on their driver’s licenses).
• Approximate percentage of their use of the automobile.
• Number of years licensed.

Question 9

Section 4: Driver Information - Old Retiree Discount

Answer 9

The OAF 1 also asks whether any of the drivers qualify for a retiree discount. Special Note 2: Retiree Discount explains the qualification requirements to obtain this discount. The discount applies if the principal operator:

• Is retired.
• Is age 65 or older or receiving a pension.
• Has no earned income.
• Is not working.
• Has not been employed for the last 26 weeks in the last 52 weeks.
• Is not operating a business.

It also indicates that, if the applicant qualifies, they must sign a declaration that they are a retiree.

Near the end of this section, the applicant must provide information about their most recent insurer, including the policy number and expiry date.

Further questions ask whether the applicant knows of:

• Any suspensions or cancellations of the driver’s licenses of any listed driver within the last six years.
• Any cancellation of insurance within the last three years for the applicant or any listed driver.
• Any claim denied for material misrepresentation within the past three years for the applicant or any listed driver.
• Any fraud connected with automobile insurance by the applicant or any listed driver. (There is no time restraint on this question.)

If the answer to any of the above questions is “yes”, the applicant must provide details in the Remarks section.

Question 10

Section 5: Previous Accidents and Insurance Claims

Answer 10

In Section 5: Previous Accidents and Insurance Claims, the applicant must provide details of any and all previous accidents and claims for the last six years. This information applies to all owned vehicles, or use or operation of any automobile, including where they were listed as a driver. Any accidents that occurred while the applicant was driving a non-owned automobile (such as an employer’s) must also be disclosed.

The previous accident and claim information must include the following, to the best of the applicant’s knowledge: drivers, vehicles, dates, types of claim, and amounts paid.

Question 11

Section 6: History of Convictions

Answer 11

The insurer will carefully screen all applicants to ensure that insurance is not provided to anyone who has an undesirable driver history. They will check the applicant’s convictions history from the previous three years, including offences for impaired driving, speeding, and failure to yield the right of way. Even though offences may not have resulted in an accident, they may point to poor driving habits or a disregard for the law.

Section 6: History of Convictions requires the date and description of each conviction.

Question 12

Section 7: Rating Information

Answer 12

Section 7: Rating Information is for the insurance broker or company to develop the rating information based on all the previous sections of the application. It will indicate:

• The driving class.
• Driving record for each section of the policy.
• Claim or conviction surcharges.
• Vehicle price or code.
• Applicable rate groups for accident benefits.
• Direct compensation and physical damage.
• Location and territory.
• Any discounts that may apply.

Question 13

Section 8: Insurance Coverages Applied For

Answer 13

Section 8: Insurance Coverages Applied For allows the applicant to select the coverages required, including any optional increased accident benefits or endorsements. They may also select limits and deductibles.

A total premium is shown per vehicle; however, the applicant needs to be informed that the policy premium shown is an estimated premium and subject to adjustment or confirmation by the insurer. The applicant also needs to be informed that there will be a minimum premium charge if the applicant cancels their policy.

Question 14

Section 9: Remarks

Answer 14

Section 9: Remarks allows the applicant to provide further details for any of the above application sections.

Question 15

Section 10: Method of Payment

Answer 15

Section 10: Method of Payment identifies the type of payment plan, estimated policy premium, tax, interest, and total estimated cost. Separate boxes are for amount paid, balance owing, number of remaining installments, amount of each installment, and due date.

Question 16

Section 11: Declaration of Applicant

Answer 16

When insurers need to verify the truth of the information contained in the application, they rely on two common sources: (1) Ontario’s Ministry of Transportation or such other provincial registry having jurisdiction and (2) the applicant’s previous insurer, the name of which must be disclosed in the application, if applicable.

Section 11: Declaration of Applicant is where the applicant signs to attest that they understand the purpose and factual accuracy of the information they have provided, including that the drivers:

• Must not suffer from mental or health-related disabilities that will interfere with the ability to drive safely.
• Must not be addicted to alcohol or drugs to the extent that it will interfere with their ability to drive safely.
• Must notify the Ministry of Transportation if they become physically or emotionally disabled to the extent that it will interfere with their ability to drive safely.

The applicant warrants that all drivers are qualified to
hold a driver’s license and that all completed sections of the application are correct. Warning is given for false statements, misrepresentations, and fraud.

The Insurance Act requires that the insured be given clear warning of the consequences for making a false statement on the application for insurance and any subsequent claim brought under the policy. Generally, the right to recover under the policy is forfeited when the insured:

Provides a false description of the automobile being insured which is to the prejudice of the insurer. For example, manufacturers normally make two or more models of the same automobile. When the difference between them is substantial, the premium required to insure them may vary significantly. When an applicant seeking a lower premium describes the automobile as being of a lesser model than it actually is, such description prejudices the position of the insurer.

• Knowingly misrepresents the risk or fails to disclose a required fact. Misrepresentation can often be traced to the applicant’s statements regarding previous accidents, refusals of insurance, or the intended use of the vehicle.
• Breaches a policy term. The most common contraventions are usually of those set out in the Statutory Conditions.
• Commits a fraud. Fraud is committed, for example, when insureds attempt to claim for loss or damage to the automobile which was deliberately caused by them.
• Willfully makes a false statement in respect of a claim. The word “willfully” suggests that the insured intends to deceive the insurer into paying for a claim which is not insured by the policy. False statements typically concern the consumption of alcohol, the amount of the loss, the identity of the driver, and consent to use the automobile.

Question 17

Section 12: Report of Broker/Agent

Answer 17

Section 12: Report of Broker/Agent is completed by the broker/agent and indicates:

• If the coverage has been bound.
• If the business is new to the broker.
• The type of liability card issued (for example, temporary or permanent).
• If the applicant is known to the broker.
• How long the broker has known the principal driver.

Question 18

Approved Applications

Answer 18

The Insurance Act states that the submitted application must form an actual part of the whole contract. OAP 1, Section 1.1 states that

“The contract includes three documents:

• A completed and signed Application for Automobile Insurance,
• A Certificate of Automobile Insurance, and
• This policy.”

Upon approval, the insurer will issue a Certificate of Automobile Insurance to the applicant. The certificate will include the information from the application, as well as the limits, deductibles, term of coverage, endorsements, and premium.

The front of the application has a brief explanation of the coverage sections. However, the coverage may not be the same as what was applied for, because the coverage is subject to decisions made by the insurer at the underwriting stage. Some common differences may be higher deductibles or additional restricting endorsements.

The certificate will indicate that the client can obtain a copy of the complete OAP 1 policy if requested. However, very few requests for complete policy wordings are ever made, so the Certificate of Automobile Insurance is the confirmation of coverage to the client.

Question 19

Policy Renewals

Answer 19

When a policy is renewed, the insurer will issue a new Certificate of Automobile Insurance which indicates the new inception and expiration dates. If the insurer changes any other terms, the policy is deemed to be offered on a varied terms basis.

Additionally, if there are varied terms (for example, deductible limits are higher), the Ontario Insurance Act requires that the insurer give notice to the broker not less than 45 days prior to the renewal of such varied terms. The broker must similarly give notice to the client not less than 30 days before the renewal date.

If the broker does not give the 30 days’ notice, the broker could be held responsible for the difference in the varied terms. In order to prevent errors and omissions (E&O) claims against the broker and/or the brokerage, brokers need to advise clients immediately when an insurer wishes to renew a policy on varied terms.

If an insurer does not wish to offer a renewal, this will also constitute a varied term. In these situations, the broker must either (1) replace the policy with an alternate insurer or (2) advise the client of the insurer’s position at least 30 days before the renewal date. Failing to advise the client within this time could make the broker responsible for the claim.

Effective since 1990, the Certificate of Automobile Insurance must disclose to the client how their policy is rated. However, it is not good enough to show a rate class 02 or 03 because this has little meaning to the general public — instead, the certificate must show an explanation of the rate class in plain language. This allows the insured to make an intelligent comparison of coverages and the criteria. This rate class disclosure includes chargeable claims, discounts that may be available, class description (02, 03, 07, etc.), driving record description, and surcharges.