Chapter 9 - OAP1 Flashcards

Question

SECTION 2.1: DESCRIBED AUTOMOBILE

Answer 1

A described automobile is any automobile or trailer (or motorized snow vehicle) specifically shown on the Certificate of Automobile Insurance. This Certificate of Automobile Insurance shows which coverages were purchased for each described automobile. The coverages should include Section 3: Liability Coverage, Section 4: Accident Benefits Coverage, Section 5: Uninsured Automobile Coverage, Section 6: Direct Compensation – Property Damage, and Section 7: Loss or Damage Coverages (Optional).

Answer 2

Section 2.2.1: Newly Acquired Automobiles Newly acquired automobiles are either replacement automobiles (that is, a trade-in car) or additional automobiles (that is, a new car while keeping the old one). The new vehicle will have the same coverage as the vehicle it replaces, up to 14 days from the date it was purchased, provided the vehicle is not insured somewhere else. The 14-day window allows the insured enough time to arrange insurance on the new vehicle. However, this time period is not free coverage. An endorsement needs to be processed to add the new vehicle, effective to the purchase date; this allows the insurer to collect for the coverage it is providing. This additional automobile extension can be a little difficult to understand, but there are two important points to know: 1) The policy states that, for any extension of coverage to apply, all the owned automobiles must be insured with the same insurer. The extension of coverage is an accommodation by the insurers for their insureds. If all vehicles are insured with one company, then it is a logical assumption that any new vehicle will also be insured with the same company. If vehicles are insured with more than one company, neither company will grant the extension, as there is no guarantee that the automobile will eventually be insured through them. If the business is not going to be placed with a particular insurer, the insurer will not grant the extension. 2) The policy states that the coverage provided under the automatic extension to an additional newly acquired automobile will be determined by the coverages in place on all owned automobiles. For example, for collision coverage to apply, collision coverage must be in place on all vehicles.

Answer 3

A “temporary substitute automobile” is defined as an automobile not owned by the insured or anyone else living in the insured’s dwelling that is temporarily used while the described automobile is out of service. The described automobile must be temporarily out of service due to breakdown, repair, servicing, theft, sale, or destruction. The following coverages apply to a temporary substitute automobile, provided that a premium is shown for them on a Certificate of Automobile Insurance for the described automobile that is temporarily unavailable: * Section 3: Liability Coverage. * Section 4: Accident Benefits Coverage. * Section 5: Uninsured Automobile Coverage. * Section 6: Direct Compensation — Property Damage. If a premium is paid for physical damage coverages on the described automobile (found in all-perils, collision, comprehensive or specified perils coverages), and the driver is involved in an accident while driving a temporary substitute automobile, the physical damage coverage will respond secondary to the coverage already in place on the vehicle (refer to Section 7.4.3: Temporary Substitute Automobile Covered). Let’s look at an example: Dennis owns a 2012 Chevrolet Malibu and has it insured with $1,000,000 of liability, collision, and comprehensive coverage, each with a $500 deductible. He needs to take it in for an oil change, so he borrows a car from his friend, Arif, for the afternoon. Arif owns a 2019 Ford 150 truck. The Ford is also insured for $1,000,000, with collision and comprehensive coverage, although the deductibles on it are considerably higher (at $2,500 each). While driving the Ford, Dennis loses control and drives it into a tree at high speed. The cost of a new fender and hood is approximately $18,000. Arif’s policy will pay for the damage first, as his policy is primary on the Ford. Arif will receive a cheque for $15,500 from his insurer, representing the $18,000 loss minus the $2,500 deductible. Dennis could then claim $2,000 from his own insurer, as the Ford was a temporary substitute automobile in this case. His policy would pay Arif $2,000, representing the loss of $2,500 minus Dennis’s $500 deductible. Note: A temporary substitute automobile cannot be owned by the insured or anyone living in the same dwelling as the insured.

Answer 4

Automobiles other than the described automobile (that is, not the primary vehicle, but possibly a temporary substitute or newly acquired vehicle) are covered when driven by the insured or driven by their spouse, who lives with the insured. The following coverage applies to other automobiles if a premium for it is shown on a Certificate of Automobile Insurance for a described automobile: * Section 3: Liability Coverage. * Section 4: Accident Benefits Coverage. * Section 5: Uninsured Automobile Coverage. •Section 6: Direct Compensation — Property Damage. Section 7: Loss or Damage Coverages (Optional) are not available for other automobiles.

Answer 5

Rented automobiles also fall within the definition of “other automobile.” This means it qualifies for the four legally required coverages, but only when the automobile is driven by the named insured or their spouse who lives with them. The OAP 1 includes coverage for rented automobiles with a gross vehicle weight in excess of 4,500 kilograms, only if the rental is for personal use and rented for up to seven days. Rented automobiles with a gross vehicle weight of less than 4,500 kilograms have no time limit. This category of automobiles is specifically described to provide liability coverage when others drive automobiles rented or leased by the named insured with their permission. If the driver is negligent in the operation of the vehicle, the insured is still protected against liability imposed by law upon them as the renter. This is a new addition to the OAP 1 as of January 2007, and it is now in place due to recent legislation changing the priority of policy coverage on rented or leased automobiles. You can find more information about this in Section 9.3.8.3: Section 3: Liability Coverage.

Answer 6

Any trailer used in connection with the described automobile is insured for the following coverages: * Section 3: Liability Coverage. * Section 4: Accident Benefits Coverage. * Section 5: Uninsured Automobile Coverage. Note that if the insured owns a trailer and it is not described in the policy, it would also be covered for Section 6: Direct Compensation — Property Damage Coverage, provided (1) that it is attached to an automobile with a manufacturer’s gross weight rating of not more than 4,500 kilograms, or (2) that it is not attached to an automobile and is normally used with an automobile with a manufacturer’s gross weight rating of not more than 4,500 kilograms. In addition, it must not be designed or used for living in, for carrying passengers, or for commercial purposes.

Answer 7

Hannah owns two vehicles. Vehicle One is insured for $1,000,000 of liability, and Vehicle Two is insured for $500,000 of liability. Both are insured on the same policy. If Hannah were involved in an accident causing bodily injury or property damage to a third party, the limit of coverage would depend upon which car was involved. If Vehicle One were involved, she would be covered for up to $1,000,000 of damages. If Vehicle Two were involved, she would be covered for up to only $500,000 of damages. If Hannah were involved in an accident while driving a vehicle she did not own, the unowned vehicle would be considered an “other automobile” by the policy’s definition, and she would be covered for up to $1,000,000 for bodily injury or property damage caused to a third party, the highest limit on her policy.

Answer 8

Howard owns two vehicles. Vehicle One is insured for $1,000,000 of liability under a contract with ABC Insurance and Vehicle Two is insured for $500,000 of liability under a contract with XYZ Insurance. If Howard were involved in an accident while driving a vehicle he did not own, the unowned vehicle would be considered an “other automobile” by both policies’ definitions, since both contracts are the OAP 1. Howard, like Hannah, would be covered for up to $1,000,000 for bodily injury or property damage caused to a third party, the highest single limit of liability insurance purchased by him on one vehicle. However, the difficulty arises when determining how much each insurer, ABC and XYZ, should be forced to pay in the event of a loss. The policies state: “The amount we will pay under this policy for any incident will be a fraction of the highest policy limit. This fraction will be the proportion that the limit under this policy bears to the total of the limits of all the policies.” In this example, we have two policies: ABC’s contract covers $1,000,000 of liability, and XYZ’s contract covers $500,000. The total of liability limits in this case is $1,500,000. When the statement above is applied to ABC’s policy, ABC will pay the claim in the proportion that $1,000,000 bears to $1,500,000. The simplest way to think of this statement is to convert it to a fraction. $1,000,000 ÷ $1,500,000 = 2/3 or 0.66 Therefore, ABC will pay 66% of the claim. or up to $666,666.66. Applying the math to XYZ works in the same way: $500,000 ÷ $1,500,000 = 1/3 or 0.33. Therefore, XYZ will pay 33% of the claim, or up to $333,333.33.

Answer 9

“An automobile pulling one or more trailers will be treated as a single automobile when determining how much we will pay under Liability, Accident Benefits and Uninsured Automobile Coverages. However, they will be treated as separate automobiles when determining the deductibles and how much we will pay under Direct Compensation – Property Damage and optional Loss or Damage Coverages.”

Answer 10

“We may inspect the automobile at any reasonable time. If you do not co-operate in any reasonable arrangements for inspection, your optional Loss or Damage Coverages under Section 7 may be cancelled and any claims under that Section may be denied.”

Answer 11

Section 3: Liability Coverage describes what the insurance company will cover if a third party is killed or injured in an accident or their property is damaged when the driver or other insured persons are involved in an at-fault accident. This section describes in detail: * Who is covered. * What is covered. * The insured’s and other insured persons’ responsibilities under the contract.

Answer 12

The definition of “insured persons” under Section 3.2: Who is Covered? includes: * The named insured. * Anyone who, with permission of the named insured, personally drives the vehicle. * Anyone who, with permission of the named insured, personally operates a part of the vehicle (for example, rolls down the window or opens the hood).

Answer 13

Section 3.3: What We Cover is designed to provide coverage for liability imposed upon the named insured or other insured persons for bodily injury or property damage caused to a third party as a result of an automobile accident within Canada or the United States. The policy will make payments that the law requires on the named insured’s or other insured’s behalf, up to the limit of the policy. It includes a provision for reimbursement of out-of-pocket expenses suffered by the insured for any immediate medical aid provided to any injured third parties involved in an accident. For example, if an insured is required to pay an ambulance fee or a fee for paramedic services or medical aid to someone else, the policy will pay back the insured for these costs. This amount is paid without affecting the limit of coverage purchased. Once notification is given to the insurer that a third-party loss has occurred, the insurer will investigate, negotiate with the injured party, and make a settlement of the claim on behalf of the insured. The limit of liability purchased is reserved specifically to compensate third parties for property damage or bodily injury caused by the actions of the insured.

Answer 14

By purchasing the policy, the insured agrees that, if someone presses a lawsuit against them in Canada or the United States, the insurance company will provide the insured’s legal representation — the policy states “you or other insured persons irrevocably appoint us to act on your or their behalf.” The insured must be represented by the insurer; they cannot appoint their own legal representative. The insurer agrees to pay all costs associated with the defence of the suit, including any investigation costs appropriate, court costs levied against the insured, and any post-judgment interest accruing on that portion of the judgment that is within the limit of liability purchased. If the lawsuit is for an amount greater than the limit of insurance purchased, the insured may appoint a legal representative to defend against the amount of the suit exceeding the policy limit.

Answer 15

How Much We Will Pay uses an example to illustrate some of the payment provisions explained in Section 3.3.1: If Someone Sues You. Let’s look at another example. Tonya was involved in an accident. She lost control of her vehicle and slid on black ice into the back of the car in front of her. After coming to a stop, she realized the driver of that car had hit their head on their steering wheel. She called an ambulance and was later billed $250 for paramedic emergency response. The other driver suffered a permanent, serious disfigurement to their face, and as a result, they filed a lawsuit against Tonya for $1,500,000. Tonya is insured under an OAP 1 for $1,000,000 of liability. Tonya’s insurer will pay the $250 bill for emergency medical aid on her behalf. Her insurer will then investigate the accident, negotiate with the injured third party, and may attempt to make a settlement out of court with them. If the suit proceeds, the insurer will appoint Tonya a legal representative and defend her against the suit. The insurer will pay all costs for the lawyer appointed to Tonya, the defence cost, and any investigation costs incurred by the insurer. If Tonya loses the suit, she would have to pay the court costs (usually around $10,000 to $15,000). In her case, the insurer will cover the court costs, and $1,000,000 of the settlement, since that was the amount of insurance purchased. Tonya will be responsible for the remaining $500,000. The insurer will pay post-judgment interest on the portion of the loss insured (in this case, $1,000,000). Tonya will be responsible for the interest on the $500,000 not covered.

Answer 16

Section 3.3.3: Outside Ontario states that “If the incident happens in a jurisdiction covered by this policy in which the minimum liability coverage required is higher than the limit shown on the Certificate of Automobile Insurance, we will honour the higher amount.” The “minimum limit” referenced here is the lowest amount of legal liability coverage that must be purchased in any jurisdiction. In Canada, insureds must carry at least $200,000 of liability insurance in all common law provinces. In Quebec, insureds must carry $50,000. If an insured has insured their vehicle to the minimum limit required, the policy will honour the minimum limit in any jurisdiction where coverage is afforded (that is, in Canada and the United States). Let’s look at an example. Tinh insured his vehicle for $200,000 of liability on an OAP 1 in January. The province of Nova Scotia has raised their minimum limit to $500,000 for automobile liability insurance. If Tinh took a vacation in Nova Scotia and was subsequently sued for causing an automobile accident there, his Ontario OAP 1 would honour the higher minimum limits in Nova Scotia. In effect, the minute that Tinh drove over the Nova Scotia border, his Ontario liability increased to the limits required in Nova Scotia.

Answer 17

Section 3.3.4: If There is More Than One Named Insured Under This Policy explains how insureds under the same policy are protected against lawsuits from each other. Each insured will be treated as if a separate policy had been issued for each of them. However, the maximum amount payable for any one incident will be their purchased liability limit, split between them — not the maximum limit for each insured.

Answer 18

RENTER --> DRIVER --> COMPANY'S The OAP 1 provides a special extension of liability to protect the insured against liability imposed due to the negligent operation of a rented or leased automobile by another driver. In 2007, legislation in Ontario changed the order in which different insurance policies covering these rented and leased automobiles should pay if the automobile is involved in an accident causing bodily injury or property damage. A rented vehicle is covered by both the renter’s OAP 1 and the fleet policy of the company that owns the vehicle being rented. Take Hertz, for example — it has a policy insuring all its automobiles, which means it provides liability insurance for all drivers who rent their vehicles. This legislation makes the renter’s liability coverage respond before the rental car company’s policy will respond. If the renter allows another person to drive the rented vehicle, the renter’s policy responds first, the driver’s policy (if applicable) responds second, and the rental car company’s policy responds third. In all cases, the rental car company’s policy is the last to pay. Leased vehicles are also subject to this same priority of payment legislation for liability claims. For example, if you lease a vehicle from Honda Financial Services, it will also have an insurance policy covering the leased vehicle. While the lessee’s policy (the OAP 1) is primary, the leasing company will always have a contingent policy to cover the car in case, for some reason, the policy of the lessee does not respond to provide coverage when needed. The leasing company’s policy on a vehicle will always be the last policy called upon to respond to any liability claims brought forward. Section 3.3.5: Rented and Leased Automobiles offers two examples of how the OAP 1 would respond if a rental car were involved in an accident for which the driver was found to be negligent. In one instance, the renter is driving the vehicle; in the other instance, a friend of the renter is driving the vehicle. In both cases, the rental car company’s insurance policy responds last to the liability claim. ===== Amelia is going to rent a car from Best Rentals. Best Rentals’s policy has a liability limit of $1,000,000. If Amelia has no automobile of her own (and therefore no OAP 1), then Best Rentals’s policy would respond up to the limit of their coverage to protect Amelia from liability claims. If Amelia does own her own car (and therefore does have an OAP 1), then Best Rentals’s policy will respond, but only to top up Amelia’s own OAP 1 liability limit to the limit on Best Rentals’s policy. If Amelia has $200,000 of liability coverage under her own OAP 1 policy, this coverage would respond first to any claims, and if exhausted, then Best Rentals’s coverage would step in to pay claims over and above, but only up to the limit of their policy.

Answer 19

Section 3.4: Your and Other Insured Persons’ Responsibilities contains five points, plus a final paragraph in bold letters. Each is a Statutory Condition that the insured must fulfill in order to receive the coverage. 1) The insured must notify the insurer in writing within seven days of any incident involving the loss or damage to persons or property, giving the insurer full details of the incident and the claim arising from it. This is based on Statutory Condition 5: Requirements Where Loss or Damage to Persons or Property, which we will look at later. 2) The insured must make a statutory declaration (sworn affidavit) that the insured or other insured persons were driving the vehicle at the time of the loss. Since the insurer is liable for a potentially very large sum of money on the insured’s behalf, they expect a statement advising the insurer that either the named insured, or somebody with the named insured’s express permission to use the automobile, was involved in the accident. Anybody else driving the automobile at the time of the accident would receive no coverage. 3) The insured must co-operate with all investigative procedures as would be reasonable. Insureds are required to provide information of witnesses to the scene and co-operate in any legal action by the insurer if they ask. 4) The insured must forward any and all legal correspondence received regarding a legal action immediately to the insurer. The insurer is the insured’s irrevocable legal counsel — it’s their responsibility to act upon it. 5) The insured must not assume or admit liability for the incident or try to amicably settle the claim, except at the insured’s own cost. From the insurer’s perspective, this is very important. Admitting liability makes it almost impossible for the insurer to create a defence against any legal action that may follow. Since the insurer is potentially liable for the policy limit to the third party, any admission of responsibility to the third party could be very costly. The insured is also not allowed to interfere with any negotiations towards any settlement by the insurer. 6) Most importantly, the bold final paragraph refers to the absolute liability provision of law. If the insurer has to pay a sum of money due to a provision of law, and the payment was not made under the terms of the policy agreements, the insured is required to repay the insurer all amounts paid to a third party. See Section 9.3.8.3.6: Absolute Liability.

Answer 20

We’ve covered a lot, so let’s do a quick review. Under Section 3.3: What We Cover, an insurer agrees: * To investigate, negotiate, and settle claims. * To pay any amounts the insured is liable for, up to the policy limit. * To pay out-of-pocket expenses for immediate medical aid. * To pay defence costs if a suit is brought against the insured. * To pay court costs assessed against the insured. * To pay any post-judgment interest accruing on the part of the settlement within the policy limits.

Answer 21

Under Section 3.4: Your and Other Insured Persons’ Responsibilities, the insured agrees: * To notify the insurer in writing within seven days of any incident involving bodily injury or property damage to a third party. * To make a statutory declaration that they, or other insured persons, were operating the vehicle at the time of loss. * To help the insurer obtain information and co-operate with the insurer in any legal action. * To forward immediately everything received in writing regarding the claim, including legal documents. * Not to assume or admit liability. * Repay the insurer for any amounts it was forced to pay through the absolute liability provision.

Answer 22

Liability insurance is reserved solely to compensate others for property damage or bodily injury caused by the insured. This provision ensures the limit purchased is not used to pay for the insured’s own property or property the insured is responsible for. For example, if the insured strikes their own house with the automobile, liability coverage would not apply. However, the insured’s property policy would respond to such claims for damage.

Answer 23

There is no coverage under the policy for property contaminated due to being carried in the automobile.

Answer 24

There is no coverage under the OAP 1 for liability caused by nuclear hazards, unless the insured also has a nuclear energy hazard liability policy. The coverage, if provided, is limited to $200,000 regardless of the liability amount purchased and is excess to this other policy only.

Answer 25

Each province’s Insurance Act contains clauses commonly referred to as the “absolute liability law.” The absolute liability law is designed to protect innocent third parties when a policyholder has violated a term or condition of their contract and, as a consequence, voided their policy. It allows the injured third party access to the money under an insurance contract regardless of any act or breach of the policy by the insured. The injured party’s right to recover the insurance money payable under the policy shall not be prejudiced by: * Any assignment, waiver, surrender, cancellation, or discharge of the policy by the insured after the event giving rise to the claim. * Any act or default of the insured before or after the event in violation of the Insurance Act or the policy. * Any violation of the Criminal Code of Canada or statute of any province by the owner or driver of the automobile.

Answer 26

Civil proceedings to recover damages for injuries arising from a motor vehicle accident must be started within two years of the incident. Any court proceeding used to enforce the entitlement of coverages available according to the SABS must be started within two years after the insurer’s refusal to pay the claimed benefit.

Answer 27

Effective November 1, 1996, the right to sue for economic losses was reinstated for all accident victims who were not at fault in causing an accident and who suffered a loss to either income or earning capacity due to bodily injuries, or death, while using or operating the automobile. The innocent party can recover damages for income loss and loss of capacity from the tort-feasor. However, this amount will be a maximum of 70% of gross income from the period commencing seven days after the accident up to and including the date of trial. An innocent party will not be entitled to claim damages against at-fault parties for any damages suffered in the first seven days after the accident. After the trial, the innocent party will be entitled to recover damages on a 100% gross basis for future economic losses from the tort-feasor.

Answer 28

When someone files a claim that is a non-pecuniary loss due to a motor vehicle accident, or even by the use or operation of an automobile, any fatal injury or injury that meets the threshold (as described below) can be counted as a non-pecuniary loss. Threshold Deductibles for Non-Pecuniary Awards Motion to Determine if Non-Pecuniary Threshold Has Been Met Motion to Determine if Health Care Expenses Threshold Has Been Met

Answer 29

In a threshold-based system, people are prohibited from taking legal action until a certain point has been passed. There are two common types of thresholds: monetary and verbal. Under the OAP 1, the threshold indicates the degree of severity of an injury caused in an automobile accident in Ontario to enable the injured party to bring an action (known as a tort) against the at-fault party who caused their injuries. In simpler terms, the policyholders must be harmed “at least this much” to sue for their injuries. To meet the threshold, the injured person must be able to show that they have: * Died. * Suffered a permanent, serious disfigurement. * Suffered a permanent, serious impairment of an important physical, mental, or psychological function. The individual is then entitled to commence a civil proceeding for the recovery of non-pecuniary losses (also known as “pain and suffering”), provided that the individual was not at fault and falls into one of the following categories: * The individual was the owner of the automobile. * The individual was an occupant of the automobile. * The individual was present at the incident.

Answer 30

As of October 1, 2003, a plaintiff who obtains a judgment or a settlement for non-pecuniary loss must pay a deductible on the current non-economic loss settlement of $36,905. The deductible applies to each person included in the award — so if two spouses collectively win $1,000,000, each pays the deductible, reducing the award by $73,900. An exception to the $36,905 per person deductible exists in the Family Law Act, Section 61(2)(e), which reduces the deductible to $15,000 per person for suits pertaining to the loss of a parent or guardian, or “loss of care, guidance or companionship” claims.

Answer 31

Either a plaintiff or an insurer, on consent, can make a motion in a trial to determine if the verbal threshold for non-pecuniary loss has been satisfied. In addition, a judge may make an order to determine whether the threshold has been met, even if set out in the pretrial conference. An order made by a judge on a motion is binding on all parties at trial.

Answer 32

ther a plaintiff or an insurer defending a claim may make a motion on consent to determine whether an injury meets the definition of “catastrophic impairment” before the trial. Conversely, a judge may determine whether the threshold has been met before the trial, if it is set out in an order by a judge who conducts the pretrial conference. Catastrophic impairment includes: * Paraplegia or quadriplegia. * Amputation or other impairment causing the total and permanent loss of use of both arms. * Amputation or other impairment causing the total and permanent loss of use of both an arm and a leg. * Total loss of vision in both eyes. * Brain impairment as defined by the rating system approved by Insurance Act and SABS regulations. * Any impairment or combination of impairments that result in 55% or more impairment of the whole person according to the American Medical Association’s Guides to the Evaluation of Permanent Impairment. * A mental or behavioural impairment that creates a marked or extreme impairment. The impairment must preclude useful functioning.

Answer 33

An injured individual is precluded from commencing a civil proceeding to recover damages for personal injury or economic loss arising from a motor vehicle accident when the vehicle was uninsured. This rule applies whether they were an owner or lessee of an automobile at the time of the accident and was operating it, or if they were an occupant in their own vehicle at the time of the accident. To further deter owners from driving without prerequisite insurance, the Compulsory Automobile Insurance Act was amended to substantially increase the fines for driving without insurance. Upon conviction, for a first offence, fines will range between $5,000 and $25,000; upon a subsequent conviction, fines will range from $10,000 to $50,000.

Answer 34

As of June 1, 2016, the SABS was amended through the Automobile Insurance Rate Stability Act (Bill 59). This act and its amendments set the basic limits to the statutory accident benefits for injured individuals. Section 4: Accident Benefits Coverage explains: * Who is covered. * Types and benefits. * How to apply for benefits. * Limitations on coverage. All insureds have the option of purchasing additional coverage in the following categories: * Income replacement. * Caregiver benefit * Dependant care benefit. * Medical, rehabilitation, and attendant care. * Death and funeral benefit. * Indexation of benefits payable.

Answer 35

For accidents which occur in Ontario involving the described automobile (or other insured automobile), “insured person” means: * The named insured, their spouse, and the dependants of either spouse. * Persons specified as operators of the automobile or listed as drivers in the policy. * Any other person involved in an accident involving the insured automobile, if they cannot access their own statutory accident benefits (that is, if they do not own a vehicle or have no insurance). For accidents which occur outside of Ontario, “insured person” means: * The named insured, their spouse, and the dependants of either spouse. * A person who is an occupant of the insured automobile and who is a resident of Ontario or was a resident of Ontario at some point during the 60 days before the accident.

Answer 36

Section 4: Accident Benefits Coverage includes coverage for the named insured, their spouse, and any dependant of either who is not involved in the accident, but who suffers psychological or mental injury as a result of an accident causing physical injuries to defined family members. Since there is usually more than one vehicle involved in an automobile accident, there are priority of payment rules to prevent injured insureds from claiming from multiple policies for their injuries. Claimants for accident benefits must claim based on the priority of payments schedule below: 1) Injured persons claim from their own/their spouse’s insurer. 2) If no insurance exists, injured parties claim from the insurer of the vehicle in which they were an occupant at the time of the accident. 3) If no insurance exists there, injured parties claim from the insurer of any other vehicle involved in the accident. 4) If no vehicles involved in the accident are insured, injured parties can claim for their injuries from the Motor Vehicle Accident Claims Fund (MVACF).22

Answer 37

Income replacement benefit is available to a person (named insured or not) who sustains impairment as a result of an accident and satisfies one of the following two criteria: 1) They were employed at the time of the accident, and as a result of the accident, and within 104 weeks of the accident, suffer a substantial inability to perform the essential tasks of that employment. 2) They were unemployed at the time of the accident; however: a) They were employed for at least 26 weeks during the 52-week period or were receiving benefits under the Employment Insurance Act; b) They were 16 years of age or more or were excused from attendance at school under the Education Act at the time of the accident; and c) As a result of and within 104 weeks after the accident, they suffer a substantial inability to perform the essential tasks of the employment in which they spent the most time during the 52 weeks before the accident.

Answer 38

The insurer is not required to pay an income replacement benefit: * For the first seven days of disability. * For any period longer than 104 weeks of disability, unless an injured person, as a result of the accident, can demonstrate that they are suffering from a complete inability to engage in any employment by which they are reasonably suited by education, training, or experience. If the insured person qualifies for the benefits pursuant to a written contract as noted above, the insurer does not have to pay the benefit for the period before the day they would have been entitled to commence employment pursuant to the contract. CALCULATION The amount of the income replacement benefit will be calculated as follows: * For the first 104 weeks of disability, the insured is entitled to 70% of their gross weekly income from employment. An individual’s net weekly income is equal to their gross weekly income minus the premium payable under the Employment Insurance Act of Canada, the contribution payable under the Canada Pension Plan, and the income tax payable under the Income Tax Act of Canada and the Income Tax Act of Ontario. The maximum payable under the SABS is $400 a week. * For each week after the first 104 weeks of disability, the insured is entitled to the greater of (1) the amount specified in the above paragraph or (2) $185. All payments made under Section 4: Accidents Benefits Coverage shall be reduced by amounts equal to: * Net weekly payments for loss of income that have been received by the person as a result of an accident under the laws of any jurisdiction or under any income continuation plan. * Net weekly payments for loss of income that are not being received by the person, but are available to the person as a result of an accident under the laws of any jurisdiction or under any income continuation plan, unless the person has applied to receive payments for loss of income. However, the following will not reduce the basic income replacement benefit: * Benefits under the Employment Insurance Act. * Benefits under a sick leave plan that are not being received by the person, but are available to the person. * Payments under any workers’ compensation plan which the person is not entitled to receive because the person has elected to bring an action against the responsible third party.

Answer 39

A self-employed person (named insured or not) will receive 70% of their gross income loss, as reported to Revenue Canada at the end of the previous tax season. A self-employed person’s weekly income or loss from self-employment at the time of the accident is the amount that would be 1/52 of their income or loss from the business for the last completed taxation year as determined by the Income Tax Act.

Answer 40

If an accountant is hired to prepare the application for the income replacement benefit, the insurer will contribute a maximum of $2,500 for the preparation of one or more reports for the purpose of determining an insured person’s entitlement to an income replacement benefit.

Answer 41

For a person (named insured or not) to be entitled to the non-earner benefit, they must meet the following criteria: * The impairment must completely preclude them from carrying on a normal life within the 104 weeks after the accident. * They must not be eligible for any income replacement benefits. * They suffer impairment as a result of the motor vehicle accident. * If they received a caregiver benefit, there is no longer a person in need of care. In addition, if they meet the above criteria and were enrolled on a full-time basis in elementary, secondary, or post-secondary education at the time of the accident or completed their education less than a year before the accident, the person may be eligible to receive this benefit. The non-earner benefit is not payable for the first four weeks after the accident. Once it becomes payable, the non-earner benefit provides $185 for each week the person continues to satisfy the criteria. This coverage is available for two years after the date of the accident.

Answer 42

A person (named insured or not) is entitled to the caregiver benefit if they sustain a catastrophic impairment as a result of a motor vehicle accident and: * Resided with a person in need of care; * Were the primary caregiver for the person in need of care; and * Did not receive any remuneration for performing the caregiving activities. The caregiver must, within 104 weeks of the date of the accident, be substantially unable to engage in the caregiving activities which were performed at the time of the accident. Although the insurer is obligated to compensate an individual for all reasonable and necessary expenses incurred, the insurer will only be responsible for a maximum of $250 per week for the first person in need of care, and a maximum of $50 per week for each additional person in need of care. After the first 104 weeks of disability, an insurer is no longer obligated to continue payment of the caregiver benefit unless a claimant can demonstrate that, as a result of the accident, they suffered a complete inability to carry on a normal life. The caregiver benefit can be added by endorsement and additional premium for non-catastrophic injuries.

Answer 43

The medical benefit pays for all reasonable medical expenses incurred which are not covered under another insurance plan or provincial health care plan. Expenses recoverable include: * Medical, surgical, dental, optometric, hospital, nursing, ambulance, audiometric, and speech-language pathology services. * Chiropractic, psychological, occupational therapy, and physiotherapy services. * Medication. * Prescription eyewear. * Dentures and other dental devices. * Hearing aids, wheelchairs, and other mobility devices, prosthesis, orthotics, and other assistive devices. * Transportation for the insured person to and from treatment sessions, including transportation for an aide or attendant. * Other goods and services of a medical nature that the insured person requires.

Answer 44

The rehabilitation benefit covers not only the medical rehabilitation costs from an accident, but also the social rehabilitation costs associated with retraining and re-education. Examples of these expenses are: * Life skills training. * Family counselling. * Social rehabilitation counselling. * Financial counselling. * Employment counselling. * Vocational assessments. * Vocational or academic training. * Workplace modifications and workplace devices, including communication aids, to accommodate the needs of the insured person. * Home modifications and home devices, including communication aids, to accommodate the needs of the insured person, or the purchase of a new home if it is more reasonable to purchase a new home to accommodate the needs of the insured person than to renovate their existing home. * Vehicle modifications to accommodate the needs of the insured person, or the purchase of a new vehicle if it is more reasonable to purchase a new vehicle to accommodate the needs of the insured person than to modify their existing vehicle. * Transportation for the insured person to and from counselling sessions, training sessions, and assessments, including transportation for an aide or attendant. * Other goods and services that the insured person requires, except services provided by a case manager.

Answer 45

The attendant care benefit reimburses an attendant to look after the insured either at home or within a health care facility.

Answer 46

For minor injuries, the insurer is not obligated to pay more than $3,500 in medical and rehabilitation benefits and assessments, and there are no payments made for attendant care. If the injury is non-minor/non catastrophic, the insurer will pay a maximum of $65,000 for medical, rehabilitation, and attendant care benefits, combined. If the injury is catastrophic, the insurer will pay a maximum of $1,000,000 for all medical, rehabilitation, and attendant care benefits, combined. Transportation expenses to and from treatment sessions will be paid in accordance with the Transportation Expense Schedule created by the Ontario Insurance Commission (now under the FSRA). If the insured uses their own vehicle to commute back and forth to treatment sessions, they cannot claim reimbursement of expenses for the first 50 kilometres per visit, per round trip.

Answer 47

The insurer must pay all funeral expenses incurred, to a maximum of $6,000, for the death of an insured. If an insured person dies within 180 days of an automobile accident, or within 156 weeks of the accident if the person was continuously disabled as a result of the accident, the insurer will pay $25,000 to their spouse and $10,000 to each of the insured’s dependants. To each person to whom the insured person had an obligation to provide support under a court order or domestic contract, the insurer will pay $10,000. If the insured person did not have a spouse at the time of their death, the insurer is obligated to pay the $25,000 spousal entitlement to any legal dependant, over and above the $10,000 already paid to them. If there is more than one dependant, the sum is shared equally between them. If the deceased was a dependant, $10,000 will be paid to the person depended upon (for example, their parents or guardian). In addition, if the insured was obligated by a domestic contract or a court order to make payments to a former spouse at the time of their death, the former spouse is entitled to receive a payment of $10,000 from the insurer. For any of the individuals noted above to become entitled to the payments as outlined, they must survive the insured person by at least 30 days. If there are no surviving dependants, there will be no death benefit.

Answer 48

If the insured was enrolled in an elementary, secondary, post-secondary, or continuing education program at the time of the accident, and they are unable to continue the educational program as a consequence of the accident and an ensuing impairment, the insurer is liable to reimburse the insured up to $15,000. The term “educational expenses” includes expenses incurred for the following items before the date of the accident: * Tuition. * Books. * Equipment or room and board associated with the educational program, provided that these expenses have a reasonable connection to the educational programs in which the insured has been precluded from attending as a result of the accident.

Answer 49

If an insured suffers impairment as a result of an accident, the insurer is obligated to pay reasonable and necessary expenses incurred by any individual as designated in Section 22(1) of the SABS who visits the insured person during their treatment or subsequent recovery. Unless the insured person has suffered a catastrophic impairment, the insurer is only obligated to pay expenses under this category up to 104 weeks from the date of the accident.

Answer 50

If, as a result of an accident, the insured suffers a catastrophic impairment that renders them substantially incapable of performing housekeeping and home maintenance activities that they customarily engaged in before the accident, the insurer is liable to reimburse the insured for all reasonable and necessary expenses incurred. The maximum amount that an insurer is obligated to pay under the housekeeping and home maintenance expense category is $100 per week. In addition, unless the insured has suffered a catastrophic injury, the insurer is not required to make any payment for expenses incurred more than 104 weeks after the onset of the compensable disability. Coverage for housekeeping and home maintenance for non-catastrophic injuries can be added by endorsement and for an additional premium.

Answer 51

If claims for expenses under this category are reasonable and were incurred as a direct result of the motor vehicle accident by the insured or an individual on their behalf, an insurer is obligated to provide compensation for the repair or replacement of the miscellaneous articles logically falling within this category.

Answer 52

The insurer will pay reasonable expenses on behalf of an insured person for assessments, reports, and fees of a health practitioner (including approving treatment plans) pursuant to the provisions of the SABS. The maximum an insurer will pay is $2,000 for fees for any one assessment or examination. The insurer will not pay for fees for preparing a future plan, a life care plan, or any assessment or examination conducted in connection with the preparation of the plan.

Answer 53

The insured has an option of selecting the sum of $600, $800, or $1,000 as the maximum amount of an income replacement benefit. The provision maximizing the benefit to 70% of the insured’s gross weekly income will remain.

Answer 54

The insured can elect to amend the basic coverage to have these benefits apply to a non-catastrophic injury. The following conditions apply: ○The optional benefit applies if the insured person suffers a substantial inability to engage in caregiving activities in which they were engaged at the time of the accident. ○The optional benefit is limited to 104 weeks of disability unless, as a result of the accident, the insured person suffers a complete inability to carry on a normal life. ○The housekeeping and home maintenance benefit does not apply for expenses incurred more than 104 weeks after the onset of the disability. ○The optional benefit does not increase the weekly benefits as indicated in the basic caregiver benefit and housekeeping and home maintenance benefit.

Answer 55

The insurer will pay for reasonable and necessary additional expenses incurred by or on behalf of an insured person in caring for the insured person’s dependants, if: ○The insured person sustained impairment as a result of the accident. ○The insured person was employed at the time of the accident. ○The insured person is not receiving a caregiver benefit. The dependant care benefit will pay up to $75 per week for the first dependant and $25 per week for each additional dependant, to a maximum of $150 per week.

Answer 56

The non-catastrophic injuries basic benefit pays up to $65,000, with a five-year time limit. If the insured is catastrophically impaired, the basic benefit pays $1,000,000 for combined expenses. The non-catastrophic impairment coverage can be increased up to $130,000 for the five-year time limit. The medical, rehabilitation, and attendant care benefit for catastrophic impairment and all injuries can be increased to $3,000,000.

Answer 57

The basic level of death benefit paid to the surviving spouse ($25,000) and dependant ($10,000) of a person who is killed can be doubled by purchasing this optional coverage. This coverage also increases the basic funeral expense benefit from $6,000 to $8,000.

Answer 58

Indexation is commonly considered a cost of living adjustment to benefits, subject to weekly or monthly limits. If the indexation benefit is selected, the indexation will be applied on January 1 of every year following the accident by adjusting the amount payable under the benefit by the percentage change in the Consumer Price Index for Canada, as published by Statistics Canada under the authority of the Statistics Act. This benefit does not apply to the death and funeral benefit.

Answer 59

Section 4.3.1: Applying for Benefits — Procedures and Time Limits Section 32(1) of the SABS stipulates that an individual who wants to apply for a benefit should notify the insurer within seven days of the accident. Once notified, the insurer must quickly provide the correct application and a written explanation of the benefits the insured may be entitled to. Upon receiving the application, the insured is expected to submit the application to the insurer within 30 days. If the insurer requires any further information to determine if the insured is entitled to benefits or not, the insured must provide the additional information within 14 days of receiving the request.

Answer 60

Once the insurer determines the individual is entitled to the identified benefits, they are expected to make the first payment within 14 days after receiving the application. However, if the insurer determines that the individual is not entitled to, or is no longer entitled to, receive income replacement, non-earner, or caregiver benefits, the insurer must provide the insured notice of their determinations, including written reasons, within 14 days after receiving the initial application for benefits (or if an insurer has been paying the benefits, no later than the date the next benefit payment is due). If an insured has been receiving income replacement, non-earner, or caregiver benefits, upon receiving notice that the insurer has determined to discontinue the benefit, the insured has the right to require an assessment pursuant to Section 47 of the SABS by giving the insurer written notice before the date listed as the terminal (end) date of the benefit. Once the insurer receives this request for an assessment, the insurer is no longer entitled to stop payment of the benefits until they receive a medical assessment. There are additional reporting procedures for other accident benefits that we won’t describe here — see Sections 38 to 49 of the SABS.

Answer 61

Any initial proceedings (that is, court or arbitration proceedings) under the Insurance Act regarding these regulated benefits must be commenced within two years after the insurer’s refusal to pay the amount that was claimed.

Answer 62

On September 1, 2010, the SABS was updated to include a Minor Injury Guideline. Under the Minor Injury Guideline, the maximum that will be paid for medical and rehabilitation benefits for a predominantly minor injury shall not exceed $3,500. This limitation will not apply to an insured person if their health practitioner determines and provides compelling evidence that the insured person has a pre-existing medical condition that will prevent them from achieving maximal recovery from the minor injury. Examples of minor injuries include: * A sprain. * A strain. * Whiplash-associated disorders. * A contusion. * An abrasion. * A laceration or subluxation. * Any clinically associated sequelae. The Minor Injury Guideline sets the allowable fees for the initial treatment blocks for continuing treatments, health practitioner monitoring, completion of the Minor Injury Discharge Report (OCF-24), supplementary goods and services, and X-ray fees.

Answer 63

When a plaintiff, who is not at fault and has suffered an injury, incurs expenses for health care as a result of an injury directly or indirectly caused by the use or operation of the motor vehicle, they will be entitled to recover damages for health care expenses if the injury meets the verbal threshold of catastrophic impairment. As we learned from Section 9.3.8.3.7.4.4: Motion to Determine if Health Care Expenses Threshold Has Been Met, catastrophic impairment includes: * Paraplegia or quadriplegia. * Amputation or other impairment causing the total and permanent loss of use of both arms. * Amputation or other impairment causing the total and permanent loss of use of both an arm and a leg. * Total loss of vision in both eyes. * Brain impairment, as defined by the rating system approved by the Insurance Act and SABS regulations. * Any impairment or combination of impairments that result in 55% or more impairment of the whole person according to the American Medical Association’s Guides to the Evaluation of Permanent Impairment. * A mental or behavioural impairment that creates a marked or extreme impairment. This impairment must preclude useful functioning.

Answer 64

Recovered health expenses will be reduced by the following amounts: * All payments available before the trial of the action for statutory accident benefits in respect of the expenses for health care. * All payments received before the trial of the action under any medical, surgical, dental, hospitalization, rehabilitation, or long-term care plan.

Answer 65

Entitlement to income replacement benefits, non-earner benefits, or compensation for other expenses may be reduced or eliminated if an insured is responsible for any of the following infractions: * Knew or should reasonably have known that they were operating an automobile without insurance. * Driving an automobile while not authorized by law to drive. * Driving an automobile they were specifically excluded from driving under the policy. * Knowingly operated or should reasonably have known that the automobile was operated without the owner’s consent. * Made or knew about a material misrepresentation that induced the insurer to issue the policy. * Intentionally failed to notify the insurer of any significant changes as required under Section 1.4.1 of the OAP 1, which stipulates: “You agree to notify us properly in writing of any significant change of which you are aware of in your status as a driver, owner or lessee of a described automobile. You also agree to let us know of any change that might increase the risk of an incident or affect our willingness to insure you at current rates.” * Are convicted of a criminal offence involving the operation of an automobile.

Answer 66

An insurer may refuse the payment of income replacement benefits, non-earner benefits (including students), and other expenses for the driver of an automobile if they: * Knew or ought reasonably to have known that they were operating an automobile while it was not insured under a motor vehicle liability policy. * Drive an automobile while not authorized by law to drive, or drive while excluded as a driver under the contract of automobile insurance. * Drive a vehicle when they knew or ought to have reasonably known that they were operating an automobile without the owner’s consent. An insured waives all entitlement to income replacement benefits, non-earner benefits, educational expenses, visitors’ expenses, housekeeping benefits, and maintenance expenses if they: * Made or had knowledge of a material misrepresentation that induced the insurer to enter into a contract of automobile insurance. * Intentionally failed to notify the insurer of a change in a material risk in the contract. * Knew or ought to have reasonably known as an occupant that the driver was operating an automobile without the owner’s consent. An insurer is entitled to hold amounts payable to the insured in trust under income replacement benefits, non-earner benefits, education benefits, visitors’ expenses, or housekeeping and maintenance benefits if the insured has been charged with a criminal offence at the time of the accident and was engaged in, or was an occupant of an automobile used in connection with committing, any of the following criminal offences: * Operating an automobile while their ability to operate the automobile was impaired by alcohol or drugs. * Operating an automobile while the concentration of alcohol in the driver’s blood exceeded the amount permitted by law. * Failing to comply with the laws that command an individual to provide a breath sample. * Any other criminal offence, whether or not the offence is related to the operation of an automobile.24 Once a criminal charge has been made pursuant to the provisions of the Criminal Code, the insurer is consequently entitled to retain any amounts payable to the insured in trust pending final disposition of the charge. Once the charge has been disposed of, the insurer will either be entitled to retain the funds or pay the funds out to the insured, depending upon whether the insured was found guilty of the offence.

Answer 67

Section 5: Uninsured Automobile Coverage is designed to provide some protection for victims of accidents involving uninsured or unidentified drivers and/or automobiles. The Compulsory Automobile Insurance Act in Ontario requires all automobiles operated on public highways to be insured for a minimum of $200,000 of third-party liability coverage. However, some drivers do continue to drive without insurance. Section 5: Uninsured Automobile Coverage will respond when the insured is struck by an unidentified, identified, and/or uninsured automobile and suffers bodily injury and/or property damage. Section 5.1: Introduction defines an uninsured automobile as one that neither the owner nor driver has liability insurance to cover bodily injury or property damage arising out of its ownership, use, or operation, or the insurance is not collectible. An unidentified automobile is one whose owner or driver cannot be identified. Let’s look at the basic accident scenarios under Ontario’s no-fault insurance rules when different types of accidents involving uninsured automobiles require accident benefits to respond.

Answer 68

The insurer will pay any amounts the insured or other insured persons have a legal right to recover as bodily injury damages from the owner or driver resulting from an accident involving an uninsured or unidentified automobile, up to the limits of this section. An insured must be legally able to recover damages for bodily injury from the at-fault uninsured party before this coverage will respond. For economic loss suits, this is straightforward; however, claims for pain and suffering require the insured to have suffered a threshold injury. There can be no legal action allowed before the degree of injury sustained meets these minimum criteria. To claim any bodily injury amounts under this section in Ontario, the injured person must have either: * Died. * Suffered a permanent serious disfigurement. * Suffered a permanent serious impairment of an important physical, mental, or psychological function. The coverage responds as though it were the liability policy of the at-fault party. If the at-fault party is uninsured, Section 5: Uninsured Automobile Coverage pays where the uninsured party’s policy would have paid, if they had one in place. The maximum amount payable under this section of the policy is the minimum limit of liability where the accident took place. In Ontario, the maximum payable for bodily injury claims is $200,000.

Answer 69

If an insured dies as a result of an automobile accident, family members and others may pursue the at-fault motorist for damages caused due to the loss of that individual. Their claims will also be paid by the policy if the at-fault motorist is uninsured.

Answer 70

If the at-fault driver is identified and uninsured, claims can be made under the policy for damage to and loss of use of the automobile and its contents. Note that there is no coverage for damage caused to the automobile by any unidentified automobile under this section of the policy. If this coverage were available, it would be open to too many fraud risks. Insureds involved in single-vehicle accidents who had not purchased any physical damage coverage (collision or all-perils), or who had purchased this coverage but did not wish to claim against it due to its effect on their driving record, would almost always claim the damage was caused by a “hit and run” driver. Payments of property damage claims matching the required uninsured and identified driver requirements are limited to $25,000, and subject to the standard deductible of $500.

Answer 71

In Section 5.3.1: Who Is Covered? An “insured person” means: * Any person who is an occupant of the automobile. * The named insured, their spouse, and any dependant relative of either when: ○An occupant of an uninsured automobile. ○Not in an automobile, streetcar, or railway vehicle if hit by an unidentified or uninsured automobile (that is, a pedestrian). Under this definition, the automobile includes any automobile for which coverage is provided under the policy. This includes the described automobile, as well as temporary substitute automobiles, newly acquired automobiles, and other automobiles defined in the policy. Any person who is an occupant in any of the automobiles who suffers a threshold injury caused by an unidentified and/or uninsured motorist can claim under this provision. The named insured, their spouse, and their dependants can also claim under this provision if they are injured in an automobile accident which is the fault of the driver of the automobile in which they were an occupant, and that driver was uninsured. Again, the injured party would have to be in a legal position to sue, having met the threshold, and the payments would be limited to the minimum limit of insurance required in the state, province, or territory where the accident occurred. Most importantly, if the insured, their spouse, or their dependant is struck and injured as a pedestrian by an uninsured or unidentified driver, this provision will respond. Section 5: Uninsured Automobile Coverage is perhaps most valuable in these situations.

Answer 72

As with all coverage provided by the OAP 1, there are certain conditions placed upon the payment of claims under this section. When claiming bodily injury payments due to a threshold injury caused by an unidentified and/or uninsured motorist, the claimant must: * Provide the insurer with written notice of the claim within 30 days of the accident. If this is not possible, due to medical reasons or some other equally important reason, the notice must be provided as soon as possible after that. * Provide the insurer with as much evidence to support the claim as possible. A proof of loss should be submitted to the insurer within 90 days of the accident, giving details of the accident and the resulting loss. Again, if it is not possible to do so within the 90 days required, the claimant must do so as soon as possible after that. * Provide the insurer with documentary evidence of the injury, whether psychological or medical, from an appropriate medical specialist for the types of injuries claimed for, if requested by the insurer. Documents should state the cause of the injury or death (that is, state that an automobile accident is the proximate cause of the injuries or death) and, if appropriate, state the expected duration of the injuries. * Provide the insurer with any and all details of any other insurance contract (other than a life insurance contract if the claim is for loss of a family member) under which the claimant may be entitled to recover any other compensation.

Answer 73

When an insured is injured due to an unidentified automobile, the police must be notified of the accident within 24 hours, or as soon as possible after that if the insured or their representative is unable to do so. A written statement must be made within 30 days of the accident, giving all details of the accident to the insurer. The automobile in which the injured party was an occupant must also be made available for the insurer to inspect at their request.

Answer 74

The conditions applying to claims for property damage are very similar to Statutory Condition 6: Requirements Where Loss or Damage to Automobile. They are as follows: * The insured must notify the insurer within seven days of the accident. * The insured must protect the automobile from further damage, to the best of their ability. * The insured must not make any repairs beyond those necessary to protect the vehicle from further damage without the permission of the insurer, or until the insurer has had time to inspect the vehicle. * The insurer must be allowed to copy all legal documents pertaining to the accident. * The insurer must be allowed to inspect the vehicle at any reasonable time. * The insured must submit a proof of loss within 90 days. * The insured cannot abandon the wreckage of the automobile into the care of the insurer unless the insurer has made settlement of the claim for the full actual cash value of the vehicle. At that point, the insurer owns the salvage.

Answer 75

The insurer’s maximum liability for damage to the automobile is the actual cash value (ACV) of the automobile at the time of the loss, minus the deductible applicable to the coverage shown on the coverage summary page. An automobile’s ACV is determined by taking its original cost, and then deducting all applicable depreciation from that amount. For example: If a vehicle originally cost $25,000 in 2014, by 2021, seven years of depreciation would be subtracted from the original purchase price. If the vehicle was worth $25,000 in 2014, it may be worth only $8,000 in 2021. The mileage driven, the condition of the vehicle, and maintenance schedules all contribute to the amount of depreciation to be subtracted. In very simple terms, a vehicle’s ACV can be thought of as the price the insured could have sold it for immediately prior to the loss. The insurer will repair the automobile if it is cheaper to do so, with parts of like kind and quality as existed on or within the automobile at the time of the loss (minus the deductible).

Answer 76

Claims often arise for both bodily injury and property damage caused by the same accident. In these instances, the coverage applicable under this section will be apportioned 95% for bodily injury claims and 5% for the property damage suffered. Let’s look at an example: While driving his new Mercedes SL500, Yuri (who is insured) is struck and injured by an uninsured automobile. Yuri suffered a threshold injury, and the damage to his vehicle totals $30,000. If Yuri plans to sue for $300,000 for the bodily injury suffered, the total suit would be for $330,000. Section 5: Uninsured Automobile Coverage pays up to the minimum limit in the province where the accident occurred; in Ontario, this is $200,000. Because the total amount of the claim cannot be paid under this coverage limit, payments are then broken down according to the two parts: $190,000 (95%) for the bodily injury claim and $10,000 (5%) for the property damage claim.

Answer 77

Section 5: Uninsured Automobile Coverage is limited to the minimum legal limit of automobile liability insurance in the jurisdiction where the accident occurs. This is the maximum amount payable, regardless of the amount of property damage suffered or the number of victims injured or killed in any single accident. The insurer will also not pay: * Anything under this coverage if there exists an automobile liability insurance policy from which the injured insured party can claim. * Any amount for an accident occurring in a jurisdiction where the injured party may make a claim from an unsatisfied judgment fund or similar fund created for the purpose of compensating victims of uninsured or unidentified motorists. ○The OAP 1 will not pay in any jurisdiction where a fund exists to compensate victims for essentially the same losses. (All provinces in Canada have a Highway Victims Indemnity Fund or Unsatisfied Judgment Fund. The territories do not have a fund, nor do most American states.) Ontario’s Motor Vehicle Accident Claims Fund (our equivalent of a Highway Victims Indemnity Fund), does not recognize any claim from a person insured under a valid insurance policy; therefore, Section 5: Uninsured Automobile Coverage will pay. * Losses caused by radioactive contamination or radioactive materials. * The first $500 (standard deductible) of any accidental damage to the automobile or its contents. * Amounts over $25,000 for damage to the automobile or its contents in any one accident. * For loss or damage while a person specifically excluded from the policy is driving the automobile. Before we leave this section, let’s review: * Coverage is limited to the minimum limit of automobile liability insurance in the jurisdiction where the accident took place. In Ontario, this is $200,000. * Insurers will pay claims for bodily injury suffered by an insured person caused by uninsured and/or unidentified drivers. * Insurers will pay claims for property damage to automobiles and their contents caused by identified and uninsured drivers. * Property damage claims are limited to $25,000 for any one accident and are subject to a standard $500 deductible. * In the event of a claim for both bodily injury and property damage arising from the same accident, the limit of coverage will be apportioned as 95% ($190,000 in Ontario) for bodily injury claims and 5% ($10,000 in Ontario) for property damage claims.

Answer 78

Coverage under Section 6: Direct Compensation – Property Damage Coverage is provided for loss or damage to the insured automobile and certain trailers, their equipment, contents, and their loss of use. The basic function of the coverage is to pay for damage occurring to the insured automobile which is not the insured’s fault. For the coverage to apply, the accident must take place in Ontario and must involve at least one other vehicle insured under a motor vehicle liability policy issued by an insurer licensed in Ontario. If the insured is involved in an accident with another motorist, the natural assumption is that the damage to the insured’s vehicle caused by the other motorist should be paid for by the other motorist. In most other provinces, this would be the case. However, the disadvantage to that system is the time it takes to recover the money to pay for the repairs required. These systems require the insured to pursue a legal action against the at-fault motorist for damages. Court costs, legal fees, and lengthy litigations increase costs for everybody. In the end, the insurers pay the claims through liability coverage, defending these actions and paying court costs over and above the physical damage caused to a vehicle. In contrast, Section 6: Direct Compensation — Property Damage (DCPD) Coverage is designed to prevent these small lawsuits from having to go to court. All insurers in Ontario pay for damage to their insured’s vehicles under Section 6: DCPD Coverage to the extent (percentage) that the insured is not at fault. Let’s use two scenarios to look at how fault is determined under Section 6: DCPD Coverage claims.

Answer 79

What We Will Cover refers to Section 263 of Ontario’s Insurance Act. It states that this portion of coverage is reserved specifically for loss or damage to the automobile, its contents, and its loss of use. Section 6.2: What We Will Cover refers to Section 263 of Ontario’s Insurance Act. It states that this portion of coverage is reserved specifically for loss or damage to the automobile, its contents, and its loss of use. Since the coverage is designed to pay when the insured is not at fault or not responsible for damage caused in an accident, the coverage extends to pay for a replacement automobile or expenses for replacement transportation (for example, a rental car, taxis, buses, etc.). The coverage also pays for any contents of the vehicle which are damaged due to the accident. With few exceptions, an insured motorist generally cannot sue a negligent motorist in Ontario for damage caused to the insured automobile. The creation of a DCPD agreement between all insurers who insure automobiles in Ontario removes the necessity for lawsuits to recover money for damage caused to an insured’s vehicle by a negligent motorist. Recovery is now made from each insurer when the accident is considered to be the fault of another motorist. For the Section 6: DCPD Coverage to apply, two conditions must be met: 1) Both vehicles involved in the accident must be insured under automobile policies issued by licensed insurers in Ontario, or insurers from outside Ontario who have agreed to be bound by this section; and 2) The accident must take place in Ontario. The insurer will not pay more to repair or replace the automobile than its ACV at the time of the loss, less the applicable percentage of the deductible shown on the Certificate of Automobile Insurance for the coverage. There is a standard deductible of $500 on the Section 6: DCPD Coverage. However, the policy refers to the applicable percentage of the deductible being deducted from the settlement. If the insured is 100% not at fault for an accident causing $5,000 damage, the insurer will pay $5,000, less 100% of the deductible (or $500), making the total settlement $4,500. If the insured had been 40% at fault and 60% not at fault, the insurer would pay 60% of the $5,000 ($3,000), less 60% of the deductible ($300). The settlement in that case would be $2,700. Most insureds can pay a higher premium to reduce their deductible to $0. The bolded sentence (“You should be aware that this coverage does not apply if the automobile is described in another motor vehicle liability policy”) can be difficult to interpret. Here’s what it means: The OAP 1 provides coverage for the described automobile, newly acquired automobiles, temporary substitute automobiles, and other automobiles, as defined earlier in the text. However, Section 6: DCPD Coverage primarily applies to described automobiles and newly acquired automobiles. This is because these are vehicles owned by the named insured; temporary substitute automobiles and other automobiles belong to someone other than the insured. If the owner of the vehicle being driven has an insurance policy covering temporary substitute automobiles,25 the policy will not pay Section 6: DCPD Coverage. The owner’s policy would pay for the damage to the automobile, because the owner’s policy always pays first and is considered the primary coverage for all vehicle damage claims. If the at-fault motorist is not insured, damage to the not-at-fault motorist’s automobile can, in some cases, be claimed under Section 5: Uninsured Automobile Coverage. If the uninsured motorist cannot be identified, the not-at-fault motorist may not be able to recover any money for their loss.

Answer 80

Without Section 6: DCPD Coverage, and in tort provinces such as Alberta, the degree of fault apportioned to each driver in an accident is determined by the judge presiding over the lawsuit. In Ontario, the amount of fault apportioned is determined by the Fault Determination Rules within the Insurance Act Regulations. If an insured disagrees with the degree of fault apportioned to them by the Fault Chart and the settlement presented by the insurer, they may sue their own insurer. The judge presiding over the case may alter the apportionment initially assigned by the Fault Determination Rules. Regulation 668 contains the charts that insurers use to determine their insureds’ degree of fault in any given accident situation.

Answer 81

The conditions in Section 6.5: Your and Other Insured Persons’ Responsibilities are very similar to Statutory Condition 6: Requirements Where Loss or Damage to Automobile. They are as follows: * The insured must notify the insurer within seven days of the accident. * The insured must protect the automobile from further damage, to the best of their ability. * The insured must not make any repairs beyond those necessary to protect the vehicle further without the permission of the insurer, or until the insurer has had time to inspect the vehicle. * The insurer must be allowed to copy all legal documents pertaining to the accident. * The insurer must be allowed to inspect the vehicle at any reasonable time. * The insured must submit a proof of loss within 90 days. * The insured cannot abandon the wreckage of the automobile into the care of the insurer unless the insurer has made settlement of the claim for the full actual cash value of the vehicle. At that point, the insurer owns the salvage.

Answer 82

Section 7.1.1: Coverage for Loss of or Damage to Your Automobile contains the following sentence: “This Section applies only to the extent that a claim for damage to an automobile and its equipment would not be covered by Section 6, Direct Compensation – Property Damage Coverage of a motor vehicle liability policy.” As we just learned, Section 6: Direct Compensation – Property Damage (DCPD) Coverage pays for damage to the automobile when the insured is not at fault in an accident. If payment has been made for damage under Section 6: DCPD Coverage, no payment can be claimed under this section. Damage to the vehicle from almost any other cause can be claimed under one of these four sections of loss or damage coverage. Since the insurer is paying for the restitution of damage to the insured automobile, the insurer reserves the right to inspect the automobile at all reasonable times. At the inception of a new policy, insurers often require an inspection of the vehicle before these coverages are granted. If the inspection request is not completed by the insured, coverages under Section 7: Loss or Damage Coverages (Optional) may be removed from the policy, and claims under these sections may be denied.

Answer 83

Coverage A: Specified Perils limits payments for damages to those caused directly by the following perils: * Fire. * Theft or attempted theft. * Lightning. * Windstorm. * Hail or rising water. * Earthquake. * Explosion. * Riot or civil disturbance. * Falling or forced landing of aircraft or parts of aircraft. * The stranding, sinking, burning, derailment or collision of any kind of transport in, or upon which a described automobile is being carried on, land or water.

Answer 84

Coverage B: Comprehensive is an all-risks version of Coverage A: Specified Perils. It includes everything within Coverage A: Specified Perils, as well as the perils of falling or flying objects, missiles, and vandalism. All damage to the vehicle not caused by a collision of some kind is covered under Coverage B: Comprehensive, unless specifically excluded. Note: Collisions with animals, such as deer or moose, are usually paid out under Coverage B: Comprehensive.

Answer 85

Coverage C: Collision or Upset pays for all damage suffered when the insured automobile is involved in a collision with another object, or upset (tips over). Collision occurs when the vehicle hits something in contact with the ground. Upset damage occurs when the only thing the vehicle hits is the ground.

Answer 86

This option combines the coverage of Coverage C: Collision or Upset and Coverage B: Comprehensive. The benefit to purchasing Coverage D: All Perils instead of separately purchasing Coverage C: Collision or Upset and Coverage B: Comprehensive is that Coverage D: All Perils includes two types of theft that are excluded under Coverage B: Comprehensive. While Coverage B: Comprehensive excludes theft of the vehicle by a person who lives in the insured household, Coverage D: All Perils includes it. Coverage D: All Perils also includes theft of the vehicle by an employee who drives or uses, services, or repairs the described automobile. See Section 9.3.8.7.2.3: Section 7.2.3: Certain Thefts Not Covered for more information.

Answer 87

Since Coverage B: Comprehensive and Coverage D: All Perils are both all-risks policies, there are a number of exclusions applicable to these coverages. The first three exclusions listed in Section 7.2.1: General are wear and tear exclusions: 1) Damage to tires. 2) Breakdown of any part of the automobile. 3) Any damage consisting of or caused by rusting, corrosion, wear and tear, freezing, or explosion within the engine. The next two exclusions are types of theft claims that will not be honoured: 4) Damage resulting from an illegal claim of ownership, illegal disposal, or theft of the automobile by anyone who has legal possession of it under a written agreement such as a mortgage or lease agreement. If the insured misses payments on their lease and the vehicle is repossessed, the insurer will not pay if the insured makes a theft claim for loss of the vehicle. 5) Loss or damage resulting from a change in ownership that is agreed to, even if that change was brought about by trickery or fraud. The policy provides an example of selling the car to a stranger at a party in exchange for a cheque. If the cheque bounces, the insured cannot claim the vehicle was stolen. Additional exclusions include: 6) Damage caused by radioactive contamination. 7) Damage to contents of automobiles and trailers, other than their equipment. This section pays only for loss of or damage to the insured automobile. Equipment is defined as anything provided with the automobile or trailer to be used with the vehicle, and anything that is a permanent fixture in the automobile. For example, a scissor jack is not permanently attached to the automobile, but it would be considered equipment provided with the automobile for use with the automobile. Other examples include motorcycle helmets and child car seats. 8) Reimbursement for recorded material (CDs) is limited to $25. Only recorded material that was in the playing device at the time of loss is covered. Any recorded material in the vehicle’s storage cases or visor holders is considered contents of the automobile and is therefore not covered.

Answer 88

Insureds who engage in illegal uses of the automobile forfeit any claim for physical damage payable under the policy. The policy lists some very specific illegal uses and illegal activities which render Section 7: Loss or Damage Coverages (Optional) forfeit. They include: * Any damage caused to the automobile while the insured was operating it while intoxicated. * Damage caused for any action which also results in the insured being convicted of any of the following offences under the Criminal Code of Canada: ○Causing death by criminal negligence. ○Causing bodily harm by criminal negligence. ○Dangerous operation of a motor vehicle. ○Failure to stop at the scene of an accident. ○Operation of a motor vehicle when impaired or with more than 80 milligrams of alcohol in the blood. ○Refusal to comply with the demand for a breath sample. ○Causing bodily harm during operation of a vehicle while impaired by alcohol or a drug, or a combination of alcohol and a drug, or while the concentration of alcohol or drug in the operator’s blood exceeds the limit permitted by law. ○Operating a motor vehicle while disqualified from doing so. ○If the insured uses or allows the automobile to be used in a race or speed test, or for illegal activity. ○If the insured drives the automobile while not authorized by law. ○If another person, with the insured’s permission, drives or operates the automobile under any of these conditions.

Answer 89

As explained in Section 9.3.8.7.1.2.4: Coverage D: All Perils, the policy describes (1) the theft of the automobile by a member of the insured’s household and (2) the theft by an employee of the insured who drives or uses, repairs, or services the automobile. Both types of theft are excluded under Coverage A: Specified Perils and Coverage B: Comprehensive. However, Coverage D: All Perils is not subject to these two exclusions.

Answer 90

We know that the deductible is the amount of any loss that the insured agrees to pay. The deductible amount is stated in the Certificate of Automobile Insurance. The standard deductibles in Ontario are currently $500 for Coverage C: Collision or Upset losses and $500 for Coverage A: Specified Perils or Coverage B: Comprehensive claims, as of June 1, 2016. There are two types of losses not subject to the deductible under these coverages: fire losses and lightning losses. All other losses covered under Section 7: Loss or Damage Coverages (Optional) are subject to the deductible. If the loss is caused by any insured peril other than fire or lightning, the insurer will pay the amount of the damage minus the deductible.

Answer 91

The additional benefits below are coverages for indirect financial losses suffered concurrently with the damage to an automobile. The policy covers four such losses.

Answer 92

General Average Charges General average charges occur as a result of marine law. If a boat begins to sink while on route from one port to another, the captain of the boat will order the cargo on board to be jettisoned to reduce the weight of the boat and slow the sinking. However, in many instances, not all the cargo needs to be jettisoned — it is the sacrifice of a small portion that ensures the well-being of the majority of the shipment. Marine law states that all owners of cargo which is saved from the loss must share in the compensation of those owners whose cargo was thrown overboard. The cost of the lost cargo is divided between all owners of the cargo which survived. The assessed portion of damage each cargo owner must pay is referred to as a “general average charge.” If an insured’s vehicle is on a ferry boat that starts to sink, the cars at the back of the ferry will be jettisoned to reduce weight. When the ferry lands, all owners of automobiles not jettisoned will be required to pay a fair portion of the cost to replace the vehicles jettisoned. The OAP 1 covers these general average charges:

Answer 93

The policy requires the insured to take all reasonable steps necessary to protect the automobile from further damage following an insured loss. While no repairs may be made without the express consent of the insurer, an allowance is made for repairs necessary to reduce further or continuing damage. Any expenses incurred by the insured to protect the vehicle from further damage will be reimbursed by the insurer. Necessary towing charges are also reimbursed under this provision.

Answer 94

If the vehicle catches fire and the fire department is called to extinguish it, the fire department will bill the insured for their services. The insurer will pay the fire department charges on behalf of the insured.

Answer 95

If an insured is vacationing in the United States and is involved in an accident (for example, damaging their fender), Coverage C: Collision or Upset will respond to the damage repair costs to install a replacement. When returning to Canada, the insured is technically importing a new fender. The insurer will pay the import duties on any new parts necessary for the repairs.

Answer 96

The insurer waives its right of subrogation against a party responsible for damage to the insured vehicle if the party responsible was given permission by the insured to use the described automobile. However, there are two notable exceptions to this rule: 1) If the person responsible for the damage is in the business of parking, servicing, or selling automobiles. These individuals are bailees to whom insureds have entrusted their vehicle, and they have a legal responsibility to return the vehicle to the insured in the same or better condition as it was presented to them. These individuals have their own policy to cover automobiles of their customers. 2) If the person permitted to use the automobile uses it for any of the excluded uses or criminal activities prohibited by the policy. If the insured’s friend takes the car and is involved in an accident during its regular use, the insurer will pay for the loss and not subrogate. If the insured’s friend damages the automobile while engaged in a speed test or race, any loss paid out by the insurer will be recovered from the insured’s friend.

Answer 97

We learned about temporary substitute automobiles (TSAs) in Section 9.3.8.2.2.2: Section 2.2.2: Temporary Substitute Automobile. TSAs are automobiles not owned by the insured, or anyone else in the insured’s dwelling, that the insured is using while their own automobile is unusable due to its breakdown, theft, repair, servicing, sale, or destruction. Coverage for physical damage to the TSA will be provided by the TSA owner’s insurance policy if they have purchased Section 7: Loss or Damage Coverages (Optional). If the owner of the TSA has not purchased this coverage, and the insured is legally liable for the damage to the TSA, then the policy will pay for the damage, less the applicable deductible. The liability for the damage must be imposed by law or agreed to by the insured under contract. If the owner of the TSA has coverage under their own policy, but their deductible is higher than the deductible on the insured’s policy, then the policy will pay for the difference between the deductibles. Technically, the insurer is paying the deductible amount on the TSA owner’s policy, as that sum represents an amount of loss suffered which is not covered anywhere else. The insurer pays all claims less the deductible showing on the insured’s policy, so the final amount is the difference between the deductibles.

Answer 98

If the described automobile is stolen, and the insured has purchased theft coverage (that is, Coverage A: Specified Perils, Coverage B: Comprehensive, or Coverage D: All Perils), the insurer will pay reasonable expenses for the rental of a similar substitute automobile or, if the insured chooses not to rent, pay reasonable expenses for taxis and/or public transportation instead. The maximum payable under this additional benefit is $900. The payment of these expenses will not begin until 72 hours after the insured has reported the theft to the police or the insurer. The coverage will extend until the insured vehicle is repaired (if recovered) or replaced, or sooner if money is offered to settle the claim. As long as coverage was in place at the time of the theft, this coverage will continue until the claim is settled, even if the policy expires in the meantime.

Answer 99

The conditions under Section 7.5: Your and Other Insured Persons’ Responsibilities are very similar to Statutory Condition 6: Requirements Where Loss or Damage to Automobile. They are as follows: * The insured must notify the insurer within seven days of the accident. * The insured must protect the automobile from further damage, to the best of their ability. * The insured must not make any repairs beyond those necessary to protect the vehicle further without the permission of the insurer, or until the insurer has had time to inspect the vehicle. * The insurer must be allowed to copy all legal documents pertaining to the accident. * The insurer must be allowed to inspect the vehicle at any reasonable time. * The insured must submit a proof of loss within 90 days. * The insured cannot abandon the wreckage of the automobile into the care of the insurer unless the insurer has made settlement of the claim for the full actual cash value of the vehicle. At that point, the insurer owns the salvage.

Answer 100

Section 7.6: Our Right to Repair, Replace, or Rebuild the Automobile is a plain language wording of Subsection (6) of Statutory Condition 6: Requirements Where Loss or Damage to Automobile. The insurer has the sole discretion to decide which form of indemnity will be used. If the insurer chooses to repair, replace, or rebuild the automobile instead of making a cash settlement for the loss, the insurer will notify the insured within seven days of the accident. Work will be completed within a reasonable time.

Answer 101

An insurer’s maximum liability for loss or damage to an insured automobile is the ACV of the automobile at the time of the loss, less the deductible. Note: Section 7.7: What We Will Pay mentions a $1,500 limit for after-market electronic accessories and equipment. Most people think of this limitation primarily as it relates to car audio equipment, but today’s automobiles can have devices ranging from GPS systems to infotainment modules installed after purchase. This stipulation is similar to the $25 limit on recorded material (see Section 9.3.8.7.2.1: Section 7.2.1: General).

Answer 102

We learned about the concept of Statutory Conditions in Chapter 5: Regulation of Insurance Contracts, as they relate to policies insuring for the peril of fire. Similarly, the OAP 1 Statutory Conditions outline the legal duties and responsibilities of each party to the contract and are binding on all parties. Insureds must be advised that when they breach Statutory Conditions applicable to them, they will normally lose their coverage. The Statutory Conditions for automobile insurance policies are essentially the same for all provinces. However, some provincial variations exist. Ontario’s automobile Statutory Conditions include: * Statutory Condition 1: Material Change in Risk. * Statutory Condition 2: Incorrect Classification. * Statutory Condition 3: Monthly Payments. * Statutory Condition 4: Authority to Drive. * Statutory Condition 5: Requirements Where Loss or Damage to Persons or Property. * Statutory Condition 6: Requirements Where Loss or Damage to Automobile. * Statutory Condition 7: Time Limit. * Statutory Condition 8: Inspection of Automobile. * Statutory Condition 9: Time and Manner of Payment of Insurance Money. * Statutory Condition 10: Who May Give Notice and Proof of Claim. * Statutory Condition 11: Termination. * Statutory Condition 12: Notice. * Statutory Condition 13: Statutory Accident Benefits Protected. The Insurance Act requires that these conditions are printed in every automobile insurance policy in Ontario. While violation of any of the Statutory Conditions generally results in the denial of coverage, there are some exceptions. In its efforts to limit the right to sue, the government introduced legislative changes to ensure that certain accident benefits are available regardless of any violation of the Statutory Conditions. Refer to Section 31 of the SABS for details of the circumstances in which certain benefits are not payable. Many of the Statutory Conditions are presented in plain language and have been incorporated into the OAP 1 sections we’ve learned about: * Section 1.4: Your Responsibilities. * Section 1.5: Where to Make a Claim and Who May Make It. * Section 1.6: Our Rights and Responsibilities. * Section 1.7: Cancelling Your Insurance. Let’s look at each of the Statutory Conditions in more detail.

Answer 103

Insureds must notify the insurer promptly, in writing, of any change within their knowledge that is material to the contract. The insurer must be advised of any change which occurs after the policy has been issued which serves to increase the chance for loss. Other factors which may be material and are required to be reported to the insurer include: * Change in insurable interest: If this change occurs without the actual transfer of the automobile, the insurer’s exposure may be increased. For example, if the automobile is given to a member of the insured’s family, the new owner and principal driver may represent a greater exposure to the insurer. * Addition of mortgage or lien: If a mortgage, lien, or other encumbrance affecting the automobile is made after the application has been completed, the insurer must be notified. If no notification is given, coverage for loss or damage to the automobile may be denied. * Other insurance: When other insurance for physical damage is purchased during the policy period, the insurer must be advised. Insurers need to know about the potential for fraudulent losses when insureds purchase insurance from more than one insurer.

Answer 104

If a client has been incorrectly rated, the insurer is required to make the necessary correction. This may require refunding any excess premium and paying interest at the bank rate on the overpayment. If a correction requires additional premium to be paid, it must be requested within 60 days after the contract is made. No interest is charged.

Answer 105

This condition allows the client to pay the premium in equal monthly installments. The interest rate is in accordance with the Regulations in the Insurance Act.

Answer 106

The insured will not drive or operate the automobile unless they are authorized by law to drive or operate it. This requirement also applies to anyone else that the insured may permit to drive. To be authorized, the driver must have a valid license. Additionally, failure to renew the license may invalidate the coverages. The insured is prohibited to use or permit the vehicle to be used in the following situations: * Races or speed tests. * Any illicit or prohibited trades or professions.

Answer 107

Let’s examine the subsections of Statutory Condition 5 in detail. “(1) The insured shall: (a) give to the insurer written notice, with all available particulars, of any accident involving loss or damage to persons or property and of any claim made on account of the incident;” The OAP defines “notice” in Statutory Condition 7: Time Limit. The written notice specified here must be delivered within seven days of the incident, provided the insured is able to do so. If the insured is unable to provide this notice due to incapacity or injury, the insured must provide this notice as soon as possible thereafter. The requirement for notice is important because the failure to provide such notice could result in a loss of coverage. The courts have ruled that the obligation for notice depends on the circumstances of the loss. For example, in accidents involving serious bodily injury or property damage to others, it is expected that the insurer will be advised immediately. On the other hand, more time would be permitted to report an accident with more minor (or less invasive) damage, like running over a neighbour’s bicycle left on the insured’s driveway. “(b) verify by statutory declaration, if required by the insurer, that the claim arose out of the use or operation of the automobile and that the person operating or responsible for the operation of the automobile at the time of the accident is a person insured under this contract; and (c) forward immediately to the insurer every letter, document, advice or statement of claim received by the insured from or on behalf of the claimant.” The insurer has both a right and a duty to defend the insured in any legal action. When it is clear that the other party involved in the accident is contemplating or has initiated legal action against the insured, copies of all legal documents received by the insured must be forwarded immediately to the insurer. “(2) The insured shall not: (a) voluntarily assume any liability or settle any claim except at the insured’s own cost; or…” Insureds must be advised that any voluntary assumption of liability, or efforts they take to settle any claim on their own, may impair the ability of the insurer to provide a proper defence. The right to investigate, defend, and settle claims rests with the insurer and not the insured. Accordingly, any obligations or costs incurred without the consent of the insurer are not recoverable under the policy. “(b) Interfere in any negotiations for settlement or in any legal proceeding.” As the insured’s irrevocable attorney, the insurer has full control over the settlement and defence of all claims against the insured. Under this Statutory Condition, the insured agrees not to interfere in those proceedings. “(3) The insured shall, whenever requested by the insurer, aid in securing information and evidence and the attendance of any witness and shall co-operate with the insurer, except in a pecuniary way, in the defence of any action or proceeding or in the prosecution of any appeal.” Insureds are required to assist the insurer in their defence. When requested to do so, these costs will be paid by the insurer.

Answer 108

Statutory Requirement 6: Requirements Where Loss or Damage to the Automobile begins as follows: “(1) Where loss of or damage to the automobile occurs, the insured shall, if the loss or damage is covered by this contract, (a) give notice thereof in writing to the insurer with the fullest information obtainable at the time; (b) at the expense of the insurer, and as far as reasonably possible, protect the automobile from further loss or damage; and” This Statutory Condition contains the rules for claims involving loss or damage to the insured automobile. Specifically, the insured must take all reasonable steps to protect the automobile from further damage. There are benefits to insurers when they pay these costs. For example, removing the automobile from the accident site will normally prevent theft, vandalism, and other losses which might otherwise occur if the automobile were left there. Statutory Requirement 6: Requirements Where Loss or Damage to the Automobile also explains that the insured must provide the insurer with prompt written notice of any claim: “(c) deliver to the insurer within ninety days after the date of the loss or damage a statutory declaration stating, to the best of the insured’s knowledge and belief, the place, time, cause and amount of the loss or damage, the interest of the insured and of all others therein, the encumbrances thereon, all other insurance, whether valid or not, covering the automobile and that the loss or damage did not occur directly or indirectly through any willful act or neglect of the insured.” The insured must provide a proof of loss within 90 days of the date of the accident. If not, the insurer is not legally bound to honor the claim. In practice, most insurers will provide payment when a proof of loss is received after the allowable period, provided there is a reasonable explanation. “(2) Any further loss or damage accruing to the automobile directly or indirectly from a failure to protect it as required under sub-condition (1) of this condition is not recoverable under this contract.” When the insured fails to take reasonable steps to protect the automobile from loss, the insurer may deny payment on that portion of the damage which could have been prevented. For example, if the automobile is not removed from the accident site, theft and vandalism losses tend to occur. Moving the vehicle could likely be within the insured’s ability, which means that any theft or vandalism losses could have reasonably been prevented. Therefore, those losses will not be paid by the insurer. “(3) No repairs, other than those that are immediately necessary for the protection of the automobile from further loss or damage, shall be undertaken and no physical evidence of the loss or damage shall be removed: (a) without the consent of the insurer; or (b) until the insurer has had a reasonable time to make the examination for which provision is made in statutory condition 8.” The insured is authorized to make repairs which are “immediately necessary” for the protection of the automobile. For example, the insured is authorized to replace a tire damaged in the accident to move the automobile to a safe location. In all other cases, repair cannot be undertaken without the insurer’s permission.

Answer 109

“(4) Insureds shall submit to examination under oath at such reasonable time and place as is designated by the insurer and shall produce all documents that relate to the matters in question and permit extracts and copies thereof to be made.” This right is important if the insurer suspects the insured may be attempting to make a fraudulent claim or when the insurer is establishing the basis for the defence of a serious liability claim.

Answer 110

Subsection (5) explains that the insurer will pay the loss or damage according to actual cash value, minus a deduction for depreciation. Factors considered in determining the amount of depreciation include: * Exterior paint, trim, and condition. * Mechanical condition. * Mileage. * Interior upholstery and trim. * Equipment and accessories. * Tires. * Any other information that affects the automobile’s value. The insurer’s liability for obsolete or out-of-stock parts is limited to the value of that part at the time of loss or damage, not exceeding the manufacturer’s latest list price.

Answer 111

Subsection (6) explains that the insurer may repair, rebuild, or replace the property damaged or lost (instead of making payment) if it gives written notice of its intention to do so within seven days after the receipt of the proof of loss. There is an exception to this Statutory Condition when an appraisal has been made. The insurer always has the option of making settlement through repair or replacement instead of paying money. When the insurer elects to repair or replace, it must advise the insured no later than seven days after the insurer has received the proof of loss. If the insured has not received notice of the intentions of the insurer within that period, they are entitled to be paid on a cash settlement basis. If the insurer decides to repair the automobile after an accident, the insurer may, but does not have to, use new parts provided by the original equipment manufacturer. It is important to note that the insurer has the right to use rebuilt or refurbished and non-original (after-market) parts, provided these parts are of a like kind and quality of the parts which they are to replace. Most physical damage claims are settled without dispute. However, if the insured and insurer disagree on the nature and extent of the repairs and replacements required, their adequacy, or the amounts payable, the Insurance Act provides that these questions will be determined by appraisal. Either party may request that an appraisal be provided. Details about the appraisal process can be found in the Insurance Act.

Answer 112

“(7) There can be no abandonment of the automobile to the insurer without the insurer’s consent. If the insurer exercises the option to replace the automobile or pays the actual cash value of the automobile, the salvage, if any, shall vest in the insurer.” Subsection (7) means that the ownership and responsibility for the automobile after a loss remains with the insured, even when it is apparent the loss is a total loss. When the automobile is replaced or the full actual cash value is paid by the insurer, the salvage is the property of the insurer. This prevents insureds from profiting from their loss. However, this does not prevent the insured from negotiating the purchase of the wreck as a part of the final settlement.

Answer 113

Statutory Condition 7: Time Limit requires the insured to send the notice referenced in Statutory Condition 5: Requirements Where Loss or Damage to Persons or Property and Statutory Condition 6: Requirements Where Loss or Damage to Automobile within seven days of the incident. If the insured is unable to provide notice within seven days because of incapacity (for example, if they are seriously injured in the accident), the notice must be given as soon as possible.

Answer 114

“The insured shall permit the insurer at all reasonable times to inspect the automobile and its equipment.” The insurer has the right to inspect the automobile “at all reasonable times.” This allows the insurer to confirm that the automobile for which coverage is being claimed is one which is insured by the policy. Also, such inspection helps to verify the extent of the damage caused to the automobile.

Answer 115

Any payment that the insurer is liable for under the contract must be made within 60 days after receipt of the proof of loss, provided no appraisal has taken place. If an appraisal has taken place, the insurer is liable to make payment within 15 days of the appraisal. This allows the insurer a reasonable amount of time to investigate and process the claim. If the insurer refuses to pay the claim, it must promptly inform the insured in writing, stating the reasons for not paying the claim. The insured may not commence an action against the insurer until they have complied with the requirements of Statutory Condition 5: Requirements Where Loss or Damage to Persons or Property and Statutory Condition 6: Requirements Where Loss or Damage to Automobile. If an action is brought against the insurer, such action must be commenced either (1) within one year after the date of loss for recovery of loss or damage to the automobile or its contents or (2) within two years after the cause of action arose for loss or damage to persons or other property.

Answer 116

Notice and proofs of claim may be given and made by the agent of the insured if the insured is absent or unable to do so, providing the absence is satisfactorily accounted for. Alternatively, if the insured refuses to do so, a claim may be made by a person to whom any part of the insurance money is payable. There may be occasions when insureds are unable to give notice of loss or proof of loss; it would be unfair to deny them the right to collect under the contract if they are legitimately unable to do so. In such instances, a person appointed by the insured can act on their behalf. If the insureds refuse to file notice and proof of loss, a mortgagee or other party of interest is entitled to make a claim under the policy. Statutory Condition 10: Who May Give Notice and Proofs of Claim also specifies that all amounts payable under the policy shall be reduced by the applicable deductible amount mentioned in the policy.

Answer 117

Statutory Condition 11: Termination differs from most other property/casualty policies because of the legislated “three strikes” rule for non-payment of premiums. Here’s how it works: The insured may cancel the policy at any time, subject to a short rate return of any prepaid premium. If the insurer cancels for any reason other than non-payment of premiums, cancellation is subject to a 15-day notification period beginning the day following the mailing of the notification, which must be sent by registered mail. This notification period can be shortened to five days if the notice is personally hand delivered. If there is a refund due to the insured, it will be issued on a pro rata basis and should accompany the cancellation notice. If it does not accompany the cancellation notice, the insurer should issue the refund as soon as possible thereafter. If the insured still owes any premium as of the cancellation date, the premium due must be shown on the cancellation notice. The first two cancellations for non-payment of premiums in a policy term are subject to a 30-day notification period. This period begins the day after the notification was mailed, which must be sent as registered mail. If the notification was hand delivered, then the period is 10 days. To prevent the cancellation from taking effect, the insured must pay the premium owing by noon of the business day after the cancellation date in the notification. The third cancellation for non-payment in a policy term follows the same format as any other cancellation. Notice of 15 or five days is provided, depending on the notification method used by the insurer. There is no requirement for the insurer to reinstate the policy, even if premiums owed to them are paid prior to the cancellation effective date. Cancellations are effective at 12:01 a.m. on the date specified, which means the insured has only one minute of coverage on the cancellation date.

Answer 118

“Any written notice to the insurer may be delivered at, or sent by registered mail to, the chief agency or head office of the insurer in the Province. Written notice may be given to the insured named in this contract by letter personally delivered to the insured or by registered mail addressed to the insured at the insured’s latest post office address as notified to the insurer. In this condition, the expression, ‘registered’ means registered in or outside Canada.” Statutory Condition 12: Notice outlines the rules for communications between the insured and the insurer. If an insured fails to advise the insurer of a change in residences during the policy period, they may have their coverages terminated without being aware of the termination. This is because the insurer is required to address such notice only to the “latest post office as notified to the insurer.”

Answer 119

Statutory Condition 13: Statutory Accident Benefits Protected allows for payments as set out in the SABS (outlined in Section 9.3.8.4: Section 4: Accident Benefits Coverage), even if the insured fails to comply with the Statutory Conditions.