Study 9: Automobile Physical Damage Claims - Summary

Question 1

General framework of automobile insurance legislation

Answer 1

• Each province and territory has its own automobile insurance legislation and its own standard automobile policy.
• The owner’s form of automobile coverage is identified as Standard Policy Form 1 (SPF 1).
• In some jurisdictions, policies are modified to reflect the name of the jurisdiction (for example, Quebec Policy Form 1).

Question 2

Provinces where private insurers provide all automobile insurance

Answer 2

• Alberta (has direct compensation)
• Ontario (has direct compensation)
• New Brunswick (has direct compensation)
• Nova Scotia (has direct compensation)
• Prince Edward Island (has direct compensation)
• Newfoundland and Labrador (has direct compensation)
• Northwest Territories and Nunavut
• Yukon

Question 3

Auto insurance in British Columbia

Answer 3

• Insurance Corporation of British Columbia (ICBC) administers the Autoplan, the compulsory automobile insurance regime. There is a direct compensation system providing basic vehicle damage coverage to automobiles.
• Government and private insurers compete for optional coverage. ICBC does not issue policies for compulsory coverage and uses its own Autoplan optional policy for optional insurance.
• Private insurers use the owner’s form to offer extensions of coverage. Private insurers also offer various endorsements to accompany the owner’s form.

Question 4

Auto insurance in Saskatchewan

Answer 4

• No policy is issued for the basic compulsory coverage, but rather the Automobile Accident Insurance Act is the master policy and the registration certificate and driver’s licence are proof of insurance.
• Saskatchewan Government Insurance (SGI) administers the Auto Fund, the compulsory automobile insurance program. Collision coverage for licensed automobiles is compulsory in Saskatchewan. SGI Canada and private insurers compete for optional coverage.

Question 5

Auto insurance in Manitoba

Answer 5

Manitoba Public Insurance Corporation (MPIC) is the government administrator for the compulsory automobile regime known as Autopac. MPIC and private insurers compete for optional coverage.

Question 6

Auto insurance in Quebec

Answer 6

The Société d’assurance automobile du Québec (SAAQ) administers a no-fault government bodily injury regime, and private insurers administer property damage insurance through a direct compensation regime. Private insurers also offer excess accident benefits coverages.

Question 7

Direct compensation for property damage

Answer 7

• Insureds look to their own insurer to recover for property damage losses caused by third parties.
• Applies in all jurisdictions except Northwest Territories, Nunavut, and Yukon.
• Provided through DCPD coverage for all provinces except British Columbia and Quebec
• In British Columbia, provided through basic vehicle damage coverage (similar to DCPD)
• In Quebec, provided through the direct compensation agreement

Question 8

Typical coverages for loss of or damage to the insured’s automobile

Answer 8

• Collision or upset insurance covers loss or damage caused by collision with another object or by upset of the automobile (usually rollover). It covers damage whether or not the insured is at fault for the accident.
• Specified perils insurance covers loss or damage caused by certain perils specified in the policy wording
• Comprehensive perils insurance covers loss or damage except that covered under the collision peril. Losses excluded are theft by a member of the household, damage arising from mechanical failure or corrosion, and the loss or theft of audio tapes or compact discs not in a player installed in the automobile.
• All perils insurance coverage provides for all types of losses except those that are specifically excluded. It is the broadest coverage available.

Question 9

List of specified perils for auto insurance

Answer 9

• fire,
• lightning,
• theft or attempted theft,
• windstorm,
• earthquake,
• hail,
• explosion,
• riot or civil commotion,
• falling or forced landing of aircraft or falling aircraft parts,
• rising water,
• or by the stranding, sinking, burning, derailment, or collision of any boat, railcar, truck, or other conveyance that is transporting the automobile.

Question 10

Temporary substitute vehicle coverage

Answer 10

• When the insured is driving a temporary substitute vehicle, the insured’s own policy may provide coverage.
• If insured’s deductible is lower than the owner’s, the insured’s policy will pay the difference

Question 11

Examples of endorsements for automobile damage

Answer 11

Loss adjuster must examine policy endorsements used to limit or broaden coverage

• Loss of use endorsement (automatic coverage if vehicle is stolen and comprehensive loss insured)
• Waiver of depreciation endorsement (no deduction for depreciation of the vehicle within a certain time period)
• Ridesharing endorsement (for Uber or Lyft drivers)

Question 12

Absolute Liability for Third Parties

Answer 12

• Prohibits insurers from denying a claim to a third party based on the insured’s cancelling the policy after the event that gave rise to the claim or contravening a policy condition.
• In these circumstances, coverage is limited to a minimum amount set by the jurisdiction, and the insurer can pursue recovery against the insured

Question 13

Concerns when an insured breaches an automobile policy

Answer 13

If insured is expected of breaching a policy condition, any action that could create an estoppel would be of concern. A non-waiver agreement or reservation of rights letter would be appropriate. Any misrepresentation or change to material risk should be reported to the underwriter.

Question 14

Discrepancy Between the Application and the Policy

Answer 14

When there is a discrepancy between the application and the policy, the application will prevail unless the insurer, under a separate document, clearly pointed out the differences to the insured.

Question 15

Insurance Bureau of Canada and Automobile Claims

Answer 15

• Insurance Bureau of Canada (IBC) provides data collection, compilation, and reporting services to the government’s General Insurance Statistical Agency (GISA) under its Automobile Statistical Plan.
• IBC Investigative Services actively participates in investigating organized automobile theft rings.

Question 16

Appraising Automobile Damage

Answer 16

• Appraisals provide estimates of the repair cost or value of an automobile. Can be influenced by market factors.
• They are usually arranged by the insured’s own insurer.

Question 17

Different appraisal services used by insurers

Answer 17

• Appraisers: professional appraisers who assess damage and provide estimates of cost
• Appraisal Centres: the insured drives in for an appraisal and receives documentation
• Direct repair programs: used primarily for first-party damage claims. Must have well trained staff, adequate office space, and capacity to do the number of jobs required
• Garage estimates: appropriate when damage is minor and other options are not available

Question 18

Notice of automobile loss

Answer 18

• Reports of loss, or accident report forms, must include the fullest information available
• Automobile should be identified and a precise description of the damage noted, as well as a narrative report on how the loss occurred and the circumstances

Question 19

Subrogation in Automobile Insurance

Answer 19

• The insurer has the right of subrogation upon payment of a claim
• Adjuster must protect insured’s recovery potential when an uninsured motorist is liable. Their ability to pay back the insurer must be assessed.

Question 20

Adjusters should establish the following when investigating an accident

Answer 20

• Who was at fault (or who shared in the fault)
• The extent of the damage
• Whether anyone was injured and to what extent

Question 21

The accident investigation process

Answer 21

• The investigation and appraisal must be adapted to the law of the accident location.
• An interview in person with the insured or the claimant and a visit to the accident site as soon after the loss as possible may be required.

Question 22

A formal diagram of the accident can be prepared, and should show the following

Answer 22

• Identify the accident locus to show the type of intersection: T-intersection; angular intersection; four-way, five-way, or six-way intersection; no intersection; any lanes or lane markings.
• Identify the location of the accident, and label each street and/or street intersection.
• Show stop or slow signs or any other traffic indicators.
• Indicate directions, including compass directions.
• If the scene is a parking lot, show how it is configured.

Question 23

Fault determination

Answer 23

• Loss adjusters must determine how much insureds are entitled to recover for damage to their automobiles.
• In DCPD provinces, insureds are compensated by their own insurer according to how much fault is assessed using a fault chart

Question 24

Statements for automobile accidents

Answer 24

• When a fault chart is used to determine liability, the full details of what happened may not necessarily be relevant.
• Statements for automobile claims follow the typical format. The loss adjuster contacts the insured and his or her passengers. Any third parties are also contacted to confirm the facts of the accident and, if possible, to obtain a statement.

Question 25

Using experts in automobile claims

Answer 25

Generally, the loss adjuster should hire an expert only when the amount of the claim justifies the expense and there is an opportunity to recover at least part of the claim paid.

Question 26

To pursue a subrogated claim successfully, a case for recovery must be established in the following ways

Answer 26

• An accident reconstruction expert can be used to determine how an accident occurred, thereby establishing fault.
• A cause and origin engineer can investigate the cause of a fire, determining whether an accelerant was used to ignite the fire or whether an equipment failure (failed brakes) must be investigated. This could lead to a subrogation recovery from the manufacturer.
• A mechanic may be asked to report on the state of the automobile, thereby establishing its value.
• An antique car specialist can be asked to evaluate a total loss to an automobile when conflict is anticipated about the automobile’s valuation.
• A surveyor may be required to check the topography of the roadway and compare it to plans. If it can be proven that a defect in the road caused the accident, a recovery is possible.

Question 27

The Settlement Process for Automobile Physical Damage Claims

Answer 27

Settlement authority is usually granted to the independent loss adjuster after a written report has briefly outlined the investigation, a damage appraisal has been completed, and a settlement has been recommended

Question 28

Four reasons why insurers prefer to pay for an insured automobile to be repaired rather than make a cash payment

Answer 28

• The safety of the automobile could be impaired if the insured fails to have the damage repaired immediately.
• If the insured has another accident, overlapping damages could be paid twice, increasing claim costs.
• Psychologically, there may be a tendency for people to exercise less care with a damaged automobile.
• The repair is considered to be a return to the pre-loss condition, thus discouraging fraud.

Question 29

Types of automobile total loss

Answer 29

• When the cost of repairs exceeds the value of the automobile, it is an obvious total loss.
• When the estimated cost of repairs is close to the value of the automobile, it could be a constructive total loss.
• Once an automobile is a total loss, the insurer gets title to the damaged automobile and sells it as salvage.

Question 30

Automobile theft loss

Answer 30

• The theft of an entire automobile requires a careful and complete investigation.
• Often only part of an automobile is stolen.
• Where the physical examination of the automobile (along with other findings of the investigation) indicates the possibility of fraud, the adjuster must proceed with caution.

Question 31

In the event of theft, the owner (or last person to have posession of the vehicle) should answer the following

Answer 31

• Who last had the automobile?
• When and where was it last known to be?
• What are the details of all special equipment installed on the automobile?
• Is there any pre-existing mechanical or body damage?

Question 32

Automobile fire loss

Answer 32

• Automobiles are rarely completely burned, so the cause of a fire and the circumstances must be investigated
• May be necessary to hire experts to determine if arson was a factor

Question 33

Automobile fire investigation may include the following steps

Answer 33

• Obtain statements from the owner and the person last in possession of the automobile.
• Interview firefighters, police, the tow truck driver, and any other witnesses.
• Hire an expert to determine the cause if required.
• Check maintenance records of the automobile.
• Review the insured’s finances, including any liens on the automobile.
• Determine whether the insured had other insurance losses.
• Check for any recent changes in the policy, such as a reduced deductible or an increase in coverage.

Question 34

Application of the Direct Compensation Agreement for the settlement of automobile claims in Quebec

Answer 34

• In Quebec, the Groupement des assureurs automobiles (GAA) is an association of private insurers responsible for administering the Direct Compensation Agreement for the Settlement of Automobile Claims (DCA).
• Loss adjusters apply the DCA only to collisions on public highways in Quebec involving two or more automobiles when the drivers have been identified.
• Collision coverage is still required where the DCA does not apply and where the insured is at fault.

Question 35

Quebec’s Direct Compensation Agreement and assigning fault

Answer 35

• The DCA includes a series of charts prescribing fault assessments in claim situations.
• If the charts do not address a situation, then the ordinary rules of law are used to determine fault.
• When the insured disagrees with the adjuster about his or her degree of fault, the insured can pursue his or her insurer for the disputed amount.
• Whenever the liability apportioned between motorists is more than 100 percent, the degree of liability determined in the driver’s fault chart is reduced accordingly.

Question 36

The DCA’s driver’s fault chart calls for the following issues to be ignored

Answer 36

• Actions of pedestrians
• Speed
• Weather conditions
• Road conditions
• Light, sound, or hand signals
• Marked or unmarked road lines

Question 37

Applying Ontario Direct Compensation–Property Damage

Answer 37

• To qualify under the DCPD, the damage must arise directly or indirectly from the use or operation of automobiles in Ontario, and the parties must be insured under automobile insurance policies issued by authorized insurers.
• Recovery is based on the degree of fault of the insured as determined by application of fault determination charts. The party recovers to the degree they are not at fault
• Insured is entitled to recover rental costs proportionately, according to any apportionment of fault (ex. 50% at fault = 50% of rental costs covered)
• No consideration is given to circumstances in which the incident occurs (i.e. weather, road conditions, visibility).

Question 38

Manitoba automobile damage claims

(Government plan, case study)

Answer 38

• The Basic Autopac coverage in Manitoba sets a deductible of $500 for collision insurance depending on the automobile class. The insured then has the option of reducing the deductible amount through coverage with Autopac or a private insurer.
• Minimum mandatory coverage for third-party liability is $500,000; similarly, the insured has the option of increasing the amount of insurance through Autopac or a private insurer.

Question 39

Saskatchewan Automobile Damage Claims

Answer 39

• Saskatchewan Government Insurance (SGI) provides online and telephone reporting claims services. Most vehicles with basic coverage carry a $700 deductible.
• If an insured is 50% at fault, then 50% of the other driver’s deductible is paid by their insurer (and vice versa)

Question 40

British Columbia Automobile Damage Claims

Answer 40

Accidents, if serious, must be reported to the local police (police involvement is not mandatory for minor collisions). All accidents must be reported to Insurance Corporation of British Columbia (ICBC), either online or by telephone through Dial-a-Claim.