C14 Ontario Online Tutorial
Tutor’s Notes
Study 1 – Introduction and Development of Automobile Insurance
Objectives
On completing this study, you should be able to:
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State the effect been enacted that affects the operation of an automobile.
Explain the following under Section B: legislation has on automobile insurance forms.
Briefly outline the three main types of automobile coverage.
Explain the use of precedent in common law.
Show how automobile insurance has developed in response to the need for it.
Outline how automobile insurance is distributed in Canada.
Development of Automobile Insurance
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Need for insurance due to increased development and roadways.
First coverages were for indemnifying (paying back) the insured for injury/death and
damages to others, later came coverage for vehicle itself.
Need for traffic laws became apparent and laws were mandated by municipal and
provincial governments.
Governments also enacted mandatory conditions for automobile policies—
obligations for both insured and insurer (These are called Statutory Conditions and
will be covered in Study 10).
Distribution/Underwriting in Canada
Automobile insurance in Canada is distributed and underwritten through:
1.
2.
Private companies selling:
o directly to public (i.e. State Farm);
o through brokers/agents (i.e. AXA, ING).
Crown corporations set up by provincial governments.
Provinces with Private Insurance
Alberta, New Brunswick, Newfoundland, Nova Scotia, Ontario, Prince Edward Island, Yukon,
(Quebec for some coverages).
Provinces with Government Insurance
Saskatchewan, Manitoba, British Columbia, (Quebec for some coverages).
Text Edition: 2011
Last Updated: May 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Legislation and Forms
Section 227.(1) of the Insurance Act of Ontario states:
"No insurer shall use a form of application, policy, endorsement or renewal, a claims
form or a continuation certificate in respect of automobile insurance other than a
form approved by the Commissioner."
Policy forms are controlled by government regulation in each province.Only approved policy
forms may be used, including the following:
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SPF 1 – Owner's Form
SPF 2 – Driver's Form
SPF 4 – Garage Policy
SPF 6 – Non-Owned Automobile Policy
SPF 7 – Excess Automobile Policy
SPF 8 – Lessor’s Contingent Automobile Policy
Insurance protects society by providing adequate financial protection against the negligent
operation of a vehicle.
Law
Consequences of Negligent Operation of a Vehicle
Insurance protects society by providing adequate financial protection against the negligent
operation of a vehicle.
There are three consequences to the negligent operation of a vehicle:
1. Breaking the law
2. Damage or injury to others
3. Damage or injury to one's self
Three Levels of Law in Canada
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Federal Law — applies to all provinces; has sections on driving offences i.e. DUI or other
vehicle-related offenses, such as theft.
Provincial Law — includes various highway traffic acts i.e. speed limits.
Municipal Law — inclues cross walks, parking bylaws (Note: municpal governments
pass by-laws).
Text Edition: 2010
Last Updated: April 2012
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Damage/Injury to Others
Automobile Third Party Liability:
1. Must be involving a motor vehicle.
2. Damages for which one is responsible to an innocent third party.
3. Legally liable for the damages caused by the negligent operation of a vehicle.
Accident Benefits — pays certain defined amounts to certain injured parties on a no fault basis.
At fault as well as not-at-fault parties receive the same coverage.
Damage/Injury to Self
Accident Benefits - physical Damage (Own Damage Coverage) — also called own damage, first
party vehicle damage, loss of or damage to the insured automobile.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Study 2 – Legal Concepts
Objectives
On completing this study, you should be able to:
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define define "negligence;"
explain "onus of proof" as it relates to automobile accidents; Briefly outline the three
main types of automobile coverage.
explain the principle of "subrogation;" Show how automobile insurance has
developed in response to the need for it.
state the provisions of the "absolute liability" law and comment on why it is
necessary.
Negligence
Negligence can be defined as:
The failure to do what a reasonable and prudent person would do in a given circumstance,
or doing what such a person would not do, resulting in property damage or injury.
Key points to consider:
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Legal Liability — negligent person in an accident is legally liable for damage/injury
caused.
Owners is responsible — the vehicle owner is responsible even if another person
was driving at the time of the accident.
Consent — the other driver must be operating the vehicle with the owner's consent
in order for the owner to be liable for the other driver's negligence.
Onus of Proof
Definition of onus of proof
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Law puts the burden or responsibility of proof upon the one suing.
The plaintiff must satisfy the court that the defendant's negligence caused the
plaintiff’s damages. In Ontario (and some other provinces), there is an exception if
the accident involves a pedestrian or cyclist — the motorist is presumed liable and it
is up to the motorist to prove he/she was not negligent.
Text Edition: 2010
Last Updated: April 2012
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Subrogation
The Ontario Insurance Act states in Section 278.(1):
"An insurer who makes any payment or assumes liability therefor under a contract is
subrogated to all rights of recovery of the insured against any person and may bring action
in the name of the insured to enforce those rights."
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This means insurance companies have the right to recover from the responsible
party.
Subrogation rights can be removed or limited by legislation, as has been done in
Ontario.
Absolute Liability
Plain Language Definition of Absolute Liability
Absolute liability gives innocent third party(ies) a direct right of action against the insurer to
have the insurance money under the policy paid to them. It occurs when insured breaks a
policy condition, and therefore, has no coverage under the policy.
The following will not prevent absolute liability from being paid:
1.
2.
3.
Assignment, waiver, surrender, cancellation, or discharge after the event.
Any act or default of the insured before or after the event.
Any violation of the Criminal Code.
Minimum limits — amount payable under absolute liability is the Minimum limit within the
Jurisdiction i.e. Ontario is $200,000.
Subrogation — once the insurer pays the innocent third party, it has the right to recover this
amount from its own insured by reason of absolute liability.
Text Edition: 2010
Last Updated: April 2012
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Study 3 – No-Fault Concepts
Objectives
On completing this study, you should be able to:
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state the meaning of "no-fault" as it applies to automobile insurance;
trace the development of no-fault concepts for vehicle damage and identify some of
the problems with earlier plans;
state the aims of modern "direct compensation" plans;
show how existing North American no-fault plans for injuries have developed and
identify differences among them;
state how chargeability for insurance premiums is determined under a no-fault
system.
Introduction
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"No-fault" is a term widely misunderstood by public.
The insurance industry uses no-fault to describe types of first party coverage.
Claims are settled with an insured under a no-fault system without regard to
traditional legal liability concepts.
No-Fault for Vehicle Damage
No-Fault Concepts for Vehicle Damage
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These concepts originated in Britain, as "knock-for-knock" agreements.
They resulted in cost savings and ease of handling claims.
Difficulties arose if companies did not subscribe to these agreements. There were
also problems with payment of deductibles and fault determination.
They laid the ground work for today's direct compensation plans.
Aims of No-Fault and Direct Compensation Plans
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6.
Less investigation.
Less subrogation.
Less litigation.
Speedier settlements for insureds.
Insureds deal only with their own insurer.
Cost savings resulting in lower premiums.
Text Edition: 2010
Last Updated: April 2012
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No-Fault for Injury
No Fault Concepts for Injury
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They have origins in accident and health insurance in the U.S.A.
They were Initially underwritten by Casualty departments for death, dismemberment,
loss of sight etc., and provided small benefits for low premiums.
With litigation costs rising, legislators began to experiment with no-fault concepts.
Progression of Coverage
1.
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3.
Insureds recovered medical bills up to small limit and could sue for amounts in
excess.
A higher dollar limit was used, but it encouraged larger lawsuits.
Lawsuits were banned unless injuries met certain medical descriptions or
“thresholds.”
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Study 4 – Applications for Automobile Insurance
Objectives
On completing this study, you should be able to:
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explain why automobile insurance applications are necessary;
summarize the law relating to the requirements for automobile insurance application
and the issuing of policies;
outline the information requested in an automobile insurance application for an
owner's policy and comment on how it is used by the insurer.
Introduction
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Forms must be approved by the provincial government.
In Ontario, The following must be approved by the Superintendent of Financial
Services (FSCO):
o Policy wordings
o Application forms
o Claims forms
Standard policy forms may only be varied by the use of standard (pre-approved)
endorsement forms (OPCF).
Insurance Act Provisions Regarding Application
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Section 232(1) of the Ontario Insurance act states that the application becomes part
of the policy:
o either written, signed, or a copy of a purported application.
232(2) states thate where there is no signed application, prior to policy issuance, the
insurer must send a form of application to the insured to be signed and returned:
o In is not necessary to have a signed application before issuing policy.
A claim can be denied if the application contains a misrepresentation, this includes:
o an applicant who givies false particulars of the described automobile to the
detriment of the insurer;
o an applicant who knowingly misrepresents or fails to disclose a pertinent
fact;
o in insured who contravenes a term of the contract or commits fraud; and
o an insured who willfully makes a false statement in respect of a claim.
The only way an application can be used as a defense by the insurer to deny a claim
is if it was a written signed application attached to the policy.
Section 233(1) states that misrepresentation of conditions renders a claim invalid.
Section 232(4) states that if the issued policy differs from the application the insurer
must point out the differences in writing to the insured.
If the insured does not object within seven days, the policy is deemed to be
accepted. If the insurer does not notify the insured, the insured can insist on the
coverage requested on the application.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Parts of the Application
1. Applicant’s Name and Postal Address
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Essential to proper formation of the contract.
Identifies the parties to the contract.
Identifies the person insured as the registered owner of the vehicle Provides the
information used for rating.
If vehicle is leased the lessor’s information is included as above as well.
2. Policy Period
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Includes time, day, month and year of the inception.
Coverage effective at stated time.
Expires at 12:01 am local time at postal address indicated.
3. Described Automobile
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Described by year, make, model, body type, number of cylinders, gross vehicle
weight rating.
Vehicle identification / serial number used for rating and identification purposes in
the event of a claim.
Unrepaired damage / modified or customized?
Estimated annual driving distance.
4. Driver Information
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Names of all drivers in business or household.
Driver’s license number of each.
Date of birth, sex, marital status.
Date first licensed in Canada, class, and other classes, driver’s training course.
Approx percentage of use of each vehicle.
If other licensed drivers that do not use the described vehicle must note and explain
why.
Past licence experience (ie: any suspensions or cancellations in last 6 years).
Past insurance history including name, policy number & expiry date of previous
carrier. As well as any cancellations or fraud.
5. Previous Accidents and Insurance Claims
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arising from ownership, use or operation.
Applicant or any listed driver.
In past six (6) years.
Vehicle, driver, date, type, description of claim and amount paid.
Text Edition: 2010
Last Updated: April 2012
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6. History of Convictions
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All driver during past three (3) years.
Full description required.
7. Rating Information
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Rating information section to be completed by broker/agent.
Will be used to calculate premium.
Codes based on class, driving record, drivers, at-fault claims, discounts and
surcharges, vehicle code, rate group, location and territory.
8. Coverages
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Some are mandatory and others optional.
Applicant chooses based on their needs:
* Third Party Liability
* Accident Benefits
* Uninsured Automobile
* Direct Compensation – Property Damage
* Loss of Damage
* OPCF 44R – Family Protection Endorsement
* Other Endorsement
9. Remarks
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Remarks are used to expand on any information provided in prior areas.
10. Method of Payment
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Type of payment plan.
Estimated policy premium.
* With disclaimer
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Amount paid with application.
Amount still due.
Number of remaining installments, amount of each installment and the installment
due dates.
Minimum retained premium also stated.
11. Declaration of Applicant
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Gives authorization for insurer to do credit rating, driving record information and
claims history.
Text Edition: 2010
Last Updated: April 2012
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12. Report of Broker/Agent
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Completed signed and dated by broker/agent.
Text Edition: 2010
Last Updated: April 2012
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Study 5 – Liability Coverage; Direct Compensation Property Damage
Objectives
On completing this study, you should be able to:
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discuss the legal basis for liability arising from the ownership or operation of an
automobile;
under the Liability section of the policy,
o identify the individuals who will be indemnified;
o state the coverage provided;
o explain the reason for each of the exclusions;
explain how direct compensation for property damage works;
state the types of injury claims that could be expected under the Liability section of
the automobile policy;
summarize the additional agreements of the insurer;
state the responsibilities of the insured persons;
state the agreements of the insured;
define priorities of payment.
Liability Coverage
Introduction
This section points out how important it is to determine who has the “insurable interest” in
the automobile. (Insurable interest means who actually paid for the vehicle.) The name on
the policy and on the ownership should be the same. This name represents the registered
owner and the named insured.
Other persons are defined in the policy as insured as well. The definitions vary throughout
the policy sections.
Liability Coverage
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Mandatory in all provinces and territories.
No policy can be issued for less than minimum limits.($200,000 in Ontario).
Based on negligence of insured.
Highway Traffic Act states a person's legal liability as a motorist—legislation and
regulations can modify this.
Protects the insured against his own legal liability when others are injured or their
property is damaged. The insured is indemnified under liability coverage.
Legal liability must arise out of ownership, use or operation of the
automobile.(directly or indirectly).
Insurance Act Section 239 tells who is insured and when, and governs all of the
above.
If consent to drive is an issue, the onus is on the owner to show that the driver operated the
vehicle without consent.
Text Edition: 2010
Last Updated: April 2012
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Exclusions
These are the types of losses not covered by this section of the policy:
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Damage to property:
o carried in the automobile;
o owned or rented by the insured;
o in the care, custody, or control of the insured.
Contamination of property.
Nuclear hazards — unless separate policy carried and then only as excess
insurance.
* Payments under Liability coverage are limited to policy limits plus legal costs and post
judgment interest.
Liability for Property Damage
Liability for Property Damage
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Since 1990, Ontario has had direct compensation for vehicle damage. This system is
known as Direct Compensation Property Damage or (DCPD).
This means that you deal directly with your own insurer for your damages. Liability
must be established.
Prior to 1990, tort law applied and you expected to be paid by the insurer of the
liable party.
Direct Compensation Property Damage
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This coverage pays to repair vehicles, damage to contents in vehicles, and loss of
use, to the extent that the insured is NOT AT FAULT(no coverage for contents
carried for reward.
Recovery is from the insured’s own insurer ( $500 deductible is legislated).
Must be at least 2 automobiles involved, and they must both be insured in Ontario or
insured in provinces/states that are signatory to the DCPD agreement.
Damage must occur in Ontario.
Fault Determination Rules apply. (Vehicle to vehicle damage only).
No subrogation unless the at-fault driver is a lessee or owner in a business relating
to automobiles; or the at-fault driver has out of province insurance and the at-fault
driver's insurer is not signatory to the DCPD agreement.
The rights of the insured against his own insurer under the DCPD agreement are no
greater than a third party (T.P.) would have if the insured had the right to recover
from the T.P. under the tort system.
The insured may bring an action against his or her own insurer regarding degree of
fault or amount of the settlement. Ordinary rules of law apply.
Liability for Injury Claims
Text Edition: 2010
Last Updated: April 2012
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They are governed by the Insurance Act.
This deals with the question of the “right to sue.”
Ontario Motorist Protection Plan (OMPP)—1990
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Right to Sue curtailed — limited to non-pecuniary losses.
“Threshold” stated the conditions under which a person could sue.
Bill 164—1994
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The definition of threshold was amended by removing the word “permanent,” and
adding “physical, mental, or psychological function” instead of an “important bodily
function.”
A deductible was applied to the amount of damages recoverable.
Automobile Insurance Rate Stability Act—1996
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A tort regime was re-introduced.
The Insurance Act and Regulations state the new provisions.
In Ontario, you can sue for pecuniary loss without meeting threshold, but limitations
apply.
You can sue for non-economic loss if it meets the threshold (the word “permanent”
was re-introduced into the wording).
A deductible of $30,000 is applied to non-economic loss ($15,000 Family Law Act).
Lawsuits are permitted against motorists insured outside of Ontario unless insurer
has agreement with the Commission (FSCO).
Health Care expenses must meet the threshold.
Bill 198—2003
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Lawsuits are permitted for excess medical, rehabilitation, and attendant care
benefits for not-at-fault insureds with injuries that meet the same threshold as
defined for non-economic loss.
Additional Agreements of Insurer
Additional Agreements of Insurer
These agreements are in addition to the legal liability coverage of the automobile policy.
The insurer agrees to do the following:
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investigate, negotiate, and settle all claims;
defend any actions;
pay court costs and post-judgement interest (pre-judgement is part of liability limits);
reimburse costs for providing immediate medical aid to a person injured in an
automobile accident (whether the insured is liable or not);
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
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pay minimum limits of the jurisdiction where the accident occurs;
for accidents outside Ontario — not use a legal defence that would not be available
if the policy had been issued in the jurisdiction where the accident occured (i.e. play
by the rules of the jurisdiction where the accident occurs).
Responsibilities of Insured Persons
The insured agrees to do the following:
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notify the insurer in writing of any incident involving loss or damage to persons or
property;
provide a statutory declaration regarding the circumstance of the claim, if requested;
help the insurer obtain necessary information and evidence about the incident, and
cooperate in any legal actions( but not financially);
send immediately to insurer anything received in writing concerning the claim,
including legal documents;
to not assume liability, settle any claim, except at insured’s own cost and not
interfere in any negotiations or legal proceedings.
Agreements of Insured
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The Insurer is appointed the “irrevocable attorney."
The insured will reimburse the insurer if it pays out amounts because of absolute
liability laws that it would otherwise not have paid.
Priorities of Payment
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Priorities of payment are applied only when policy limits are in jeopardy. A certain
amount is reserved for bodily injury (BI) claims and a certain amount for property
damage (PD) claims. In Ontario the amount set aside for BI claims is $19,000 and
PD is $10,000.
Study 6 – Accident Benefits
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Objectives
On completing this study, you should be able to:
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explain the need for accident benefits;
define certain frequently used terms;
state what a threshold is;
explain the rules with respect to suits for economic and non-economic loss resulting
from an automobile accident;
identify who is covered under the Accident Benefits section of the policy;
summarize the coverage provided by the Accident Benefits section;
identify the exclusions under the Accident Benefits section;
state briefly how Ontario deals with injuries when a resident is involved in an
accident outside of Ontario;
list the optional coverages that every automobile insurer in Ontario must offer.
General History of Accident Benefits; OMPP and Bill 164
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Modest Accident Benefits were introduced in the 1960s.
Up to that time the only coverages available were Third Party Liability and insurance
for damages to or destruction of the insured automobile. Injured drivers and
passengers had no protection if the insured driver was at fault.
Accident Benefits are paid regardless of fault in an accident and allow for the
following:
o immediate financial assistance for accident victims;
o accident victims do not have to wait for liability to be established or reach
settlements with third parties.
Ontario Motorist Protection Plan (OMPP)
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Implemented in 1990.
Was considered a threshold, no-fault plan.
Removed the right to sue in all cases except when the injury exceeded a "verbal
threshold."
Bill164
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Implemented in 1994.
Contained a threshold, however, definition of threshold was modified from that
contained in OMPP.
It created the Statutory Accident Benefits Schedule (SABS).
Bill 59 and Bill 198
Text Edition: 2010
Last Updated: April 2012
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Bill 59: Automobile Insurance Rate Stability Act
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Implemented in 1996.
The right to recover from a responsible third party in court now included economic
loss and medical expenses, but subject to the provisions in the Insurance Act and its
Regulations.
No threshold.
Bill 198
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Implemented in 2003.
Allowed lawsuits against the at-fault driver for healthcare expenses for injured
persons, whose injuries met a verbal threshold (described in the legislation).
Allowed injured persons to sue for non-economic losses (pain and suffering),
provided the person's injuries met the verbal threshold.
The word “permanent” was reinserted in definition of threshold under Bill 198.
Lawsuits for non-economic loss are subject to a per person deductible.
Benefits
Accident - use or operation of auto directly causes impairment or damage.
Impairment - loss or abnormality of psychological, physiological or anatomical structure as
a result of auto accident.
Insured person
For accidents in Ontario:
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named insured and listed driver;
spouse or same sex partner;
dependant of named insured or spouse;
person involved in an accident involving the insured automobile.
For accidents outside Ontario:

Occupant of the insured automobile who is a resident of Ontario or was a resident
within 60 days prior to the accident.
Persons not involved in the accident:
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Named insured, spouse and any dependant suffering mental or psychological injury
as a result of an accident to a defined family member.
Priority of Payments
Section 268 (2) of Insurance Act:
Text Edition: 2010
Last Updated: April 2012
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own insurer;
if you have no insurance, from insurer of auto in which you are a passenger;
if neither of the above, from the insurer of any auto involved in the accident;
if none of these, from the Ontario Motor Vehicle Accident Claims Fund. (i.e. no
vehicle & victim of hit & run).
Case Manager - provides coordinates services payable under medical, rehab or attendant
care.
Pre-Approved Framework - injured person’s own health care provider has responsibility for
setting up a treatment plan to process pre-defined injuries.
Treatment Plan
- document by health care professional
- describes:
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impairment, disability;
duration;
proposed goods & services& estimated cost;
provider & duration of services;
anticipated benefits;
case Manager’s identity.
Statement regarding reasonable & necessary expense under the circumstances from health
practitioner.
DACS (2006)
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An insurer can review or challenge an assessment by requesting a separate
examination from a professional of choice.
Claimant can have further assessment from own professional if benefits
discontinued following insurer examination.
Dispute Resolution System through FISCO handles disputes over assessment,
examination findings and benefit determination.
Collateral Benefits
(entitlement available outside the automobile policy)
The insurer can deduct the following amounts in calculating the amount of weekly income
replacement or non-earner benefits payable to an insured person:
Text Edition: 2010
Last Updated: April 2012
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NET payments from a gov’t plan or income continuation plan.
Income replacement available to an insured but not applied for.
Temporary disability benefits being received for an impairment prior to the accident.
Any other benefits for previous impairment.
UIC and sick leave NOT received cannot be deducted.
Collateral Benefits pay first. Insurers top up to 80% of net income to a maximum of
$400/wk.
Workers’ Compensation
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The insurer is not required to pay if W.C. is involved.
However, if the innocent employee is exercising his right of tort, the auto insurer will
pay accident benefits until the case is resolved.
When the case is resolved, the auto insurer can recover any amounts paid.
(assignment agreed to by W.C.Board – sect.10 W.C.Act.)
Accident Benefits Coverage
Mandatory Benefits are:
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Income Replacement benefits
Non-earner benefit
Caregiver benefit
Medical, rehabilitation and attendant care benefits
Payment of other expenses
Death & Funeral Benefits
Optional benefits
Income Replacement Benefits



Weekly income replacement benefit of 80% net weekly income up to 104 weeks;
maximum $400/wk.
One week deductible.
Maximum 104 weeks unless insured has complete inability to engage in any
employment.
Non-Earner Benefit
Payable to those who suffer complete inability to carry on a normal life and:


do not qualify for Income Replacement Benefit;
cease to receive a Caregiver benefit;
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Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES


were enrolled on a full time basis in school or completed education less than one
year before the accident and not employed in their chosen field;
26 week waiting period.
Caregiver Benefit
Primary caregivers disabled in an accident receive a caregiver benefit:



if the insured person was living with the person in need of care; and
the insured person was the primary caregiver and did not receive payment for the
caregiving;
cannot receive this benefit if insured is receiving an income replacement benefit or a
non-earner benefit.
Medical, Rehabilitation and Attendant Care Benefits




Medical benefits pay for reasonable and necessary medical expenses not payable
under any other insurance plan or law.
Rehabilitation benefit pays for reasonable measures to reduce or eliminate effects of
any disability resulting from the impairment.
Attendant care benefit pays all reasonable expenses for an aide or attendant or a
long term care facility such as a nursing home, chronic care hospital or old age
home.
Case Manager services.
Payment of Other Expenses





Educational expenses
Expenses of visitors
Housekeeping and home maintenance expenses
Damage to clothing, glasses, hearing aids, etc.
Costs of examinations or assessments
Death and Funeral Benefits






Paid if a person dies within 180 days of an accident or within 156 weeks if there has
been continuing disability and is survived by at least 30 days by a spouse and/or
dependants,
$25,000 to surviving spouse,
$10,000 to each surviving dependant,
$25,000 divided among dependants if no surviving spouse,
If a court order to support a former spouse, $10,000 to former spouse,
If deceased was a dependant, $10,000 to person depended upon.
Optional Benefits



Available to insureds from any insurer in Ontario.
Income Replacement benefit of $600, $800, or $1,000 per week.
Increased Caregiver benefit per week.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES




Additional $1,000,000 for Medical, Rehab or Attendant Care benefits.
Death benefit increased to $50,000 for a spouse and $20,000 to each dependant
and funeral benefit increased to $8,000.
Indexation on maximum benefits payable.
Available only to the named insured, any person specified in the policy as a driver of
the insured automobile, spouse of named insured and any dependant of named
insured or spouse.
Exclusions
No Income Replacement, Non-Earner benefits, Educational expenses, Visitor’s expenses,
Housekeeping or Home Maintenance expenses to:









Driver if convicted of operating the auto while impaired by alcohol or drugs; or if
blood alcohol level exceeds the legal limit, or any other offence whether or not
related to the operation of the auto.
Person who, as a result of the accident is convicted of failure to provide a breath
sample.
Driver who knew or should have known he/she was operating the auto without
Insurance.
Driver who was driving the auto without a valid licence.
Driver who is an excluded driver.
Driver who knew or should have known auto was being operated without the owner’s
consent.
Any person who made, or knows of a material misrepresentation not told to the
insurer or who failed to notify insurer of a material change in risk.
An occupant who knew or should have known the driver was operating the auto
without the owner’s consent.
Where a person is engaged in, or an occupant of, an auto used in connection with
an act resulting in a criminal charge. Benefits are paid into a trust account and paid
to the person if they are found not guilty.
Death and Funeral benefits, Medical, Rehab and Attendant Care benefits are still payable by
the insurer. Exclusions do not remove these coverages.
Study 7 – Loss of or Damage to the Insured Automobile
Objectives
Text Edition: 2010
Last Updated: April 2012
Page 21 of 62
C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
On completing this study, you should be able to:




discuss the options available for insuring loss of or damage to the insured's
automobile;
list the exclusions and comment on why they are necessary;
explain the purpose and use of deductibles;
describe the additional benefits (agreements of the insurer) under Section 7.
Coverages
Physical Damage Coverage (Section 7)



Covers only direct and accidental loss to automobile and equipment.
Optional coverage (except Manitoba and Saskatchewan where it is compulsory).
May be required by mortgage holder or lienholder.
Four Subsections




All Perils – combines Collision and Comprehensive (no exclusion for theft by
residents of household or by employee who drives, uses, services, or repairs the
automobile); broadest coverage.
Collision or Upset – collision with “another object” includes a trailer, the surface of
the ground, and any object on or in the ground.
Comprehensive – covers all perils other than collision or upset.
Specified Perils -names the perils that are covered; does not include glass or
vandalism.
Deductibles (Under Section 7)



Do not apply in cases of fire or lightening.
Standard = $500.
If DCPD also applies, the deductible under this section is the Collision deductible
multiplied by the percentage at-fault.
Exclusions









damage to tires;
general wear and tear;
conversion;
voluntary parting of title;
radioactive contamination;
contents;
cassette tapes (however, coverage applies to a cassette that is in the player);
anything not permanently attached to the automobile;
impaired driving;
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES


criminal code type offences under any law in Canada or U.S.A. relating to operation,
care or control of automobile, or committed by means of the automobile (applies to
insured, or others driving with permission of insured);
theft of vehicle in some circumstances (this exclusion only applies to Comprehensive
and Specified Perils coverage).
Additional Benefits (Agreements of Insurer)
Additional Benefits
The Policy provides coverage for related expenses in addition to coverage for physical
damage to the insured automobile.
Payment of Charges
If the insured is legally responsible as a result of an insured peril, the insurer will pay the
following charges:




General average
Salvage
Fire department
Customs charges* e.g. repairs and replacement parts in U.S.A.
*If a vehicle is wrecked in the U.S.A. and is sold there for scrap or salvage, the automobile
is considered to have been imported into the U.S.A. — this may result in customs charges.
Foregoing right to recover


Subrogation waived if driving with permission.
Does not apply if person is in the automobile business, or if person violates any
condition of the policy or operates it in the circumstances related in previous
exclusions.
Temporary Substitute Automobiles (TSA)







This is an additional benefit under physical damage coverage.
The insured needs to have physical damage coverage on the “described” automobile
in order to have coverage for legal liability for damages to the TSA.
Named insured and anyone driving with the permission of the named insured is
covered.
The persons described above are covered for legal liability (eith er by law or by
contract, verbal or written) for damages to the TSA.
The TSA cannot be owned by the insured or anyone living in same dwelling
premises.
The TSA replaces the “described auto” because of breakdown, service, repair, theft,
sale, or destruction.
The Owner's Policy is primary for anyone driving the TSA with permission (if the
owner is insured for such losses).
Text Edition: 2010
Last Updated: April 2012
Page 23 of 62
C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES



If the TSA owner has Collision on the TSA, the amount payable by the insurer of the
person using the TSA is the difference in deductibles if that person is liable.
If the TSA owner does not have collision on the TSA and the insured is liable, then
his insurer pays, subject to insured’s deductible.
There are Two situations where the Third Party Liability coverage of the driver of a
TSA will apply, instead of or in addition to, the Owner’s Policy:
o TSA is uninsured;
o Owner’s limit of liability under Third Party Liability is not sufficient to pay
judgment or settlement.
Loss of Use Due to Theft





Reasonable expenses are paid under All Perils, Comprehensive, or Specified Perils
for rental of similar substitute automobile or for taxis or public transportation
(coverage must be purchased under Section 7).
$900 maximum (actual outlay paid to this maximum).
72-hour waiting period from the time the theft is reported to police or insurer
Theft of the entire automobile must occur.
Period of reimbursement lasts until:
o stolen vehicle is replaced;
o necessary repairs completed if vehicle recovered; or
o date insurer makes or tenders settlement for loss or damage.
Study 8 – Uninsured Automobile Coverage
Objectives
On completing this study, you should be able to:
Text Edition: 2010
Last Updated: April 2012
Page 24 of 62
C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES



identify the possible sources of indemnity for residents of Ontario injured in Ontario
by uninsured or unidentified motorists;
outline the coverage provided by your automobile policy with respect to accidents
caused by uninsured or unidentified motorists;
state the purpose of the Highway Victims Indemnity Funds and how they operate.
Introduction
Uninsured Automobile Coverage (Section 5)



This coverage protects the insured against death, injury, or damage to the vehicle or
its contents when she is legally entitled to recover from the uninsured or
unidentified driver.
It permits recovery from her own insurer.
A threshold limits the insured’s right to sue in Ontario for general damages and
medical expenses. Lawsuits are permitted for economic loss; and in other provinces
or states.
All Provinces Have Funds
The policy states that if a fund exists in the jurisdiction where the accident happened, the
insurer will not compensate victims of uninsured or unidentified motorists. In the provinc e
of Ontario, the Motor Vehicle Accident Claims Act does not recognize the Fund if a valid
policy exists. The claim must be made against the insured's own policy.
Points to Remember Under Uninsured Motorist Coverage




Direct compensation does not apply to owned vehicle damage, since the at-fault
party is not insured (thus, no direct compensation provisions apply).
If you are operating an uninsured vehicle and damage occurs to the vehicle or its
contents, you are not permitted to sue in Ontario even though other driver is totally
at fault. (Section 265 (7) ) of the Insurance Act).
The same rules apply to lawsuits.
To determine the legal liability and the amount of damages is a matter of negotiation
between the insured and insurer. Disputes can go to arbitration or to a court of law
(Section 265 of the Insurance Act).
Coverage – Uninsured Motorist
Definitions
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Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Uninsured automobile – neither the owner nor the driver has liability insurance, or it is not
collectible.*
*Exclusion: This does not include a vehicle owned by or registered in the name of the
insured person or the insured's spouse.
Unidentified automobile – the owner or driver cannot be determined (thus, the automobile
is deemed to be uninsured).
Uninsured Motorist Coverage




Pays bodily injury to the insured or other insured persons for amounts the insured
has a legal right to recover from the owner or driver of an uninsured automobile or
an unidentified motorist.
Pays amounts to any person who has the right to recover from the owner or driver of
an uninsured or unidentified vehicle for bodily injury or death of an insured person.
(Family Law Reform Act).
Pays for physical damage to the vehicle or contents that is recoverable from an
identified driver or owner of an uninsured vehicle (max. $25,000) ($300 deductible).
Does not pay in a jurisdiction where the victim has access to a fund created for
victims
of uninsured or unidentified motorists (excluding Ontario).
Persons Covered for Death or Bodily Injury




Any occupant of the vehicle (struck by uninsured or unidentified automobile) Note:
interpretation of word “struck.”
Insured, spouse, dependant relatives; directors, officers, partners or employees who
regularly use the vehicle and their spouse and dependant relatives:
o while occupant(s) of an uninsured vehicle;
o while not an occupant of a vehicle if hit by an uninsured or unidentified
automobile (e.g. pedestrian).
If any of the above mentioned directors, officers, partners, or employees or their
spouses and dependent relatives are owners of an automobile that is insured, that
policy will provide coverage.
If a dependant relative has an insured automobile, or is occupant of his own
uninsured automobile, there is no coverage under this section of policy.
Claims Procedures
Claims for Bodily Injury or Death
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Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Unidentified third party
1. Report to police within 24 hours or ASAP after that time.
2. Written statement within 30 days.
Uninsured third party
1. Written notice within 30 days or ASAP after that time.
Uninsured or unidentified
1.
2.
3.
4.
Provide evidence within 30 days.
Provide certificate from medical or psychological advisor.
Prepare to undergo medical or psychological examinations.
Provide details of any oth er policy that might respond.
Claims for Property Damage
1. Written notice within 7 days or ASAP after that time.
2. Protect vehicle from further damage.
3. Make no repairs other than those needed to protect the vehicle until the insurer has
inspected the vehicle.
4. Allow insurer to inspect vehicle.
5. Complete proof of loss within 90 days if requested.
6. Not abandon vehicle to insurer unless it agrees to accept it.
Limitations and Exclusions







Insurer liable for minimum limits where accident happened, or minimum limits in
Ontario, whichever is the least amount.
Where another policy responds, the insurer pays the difference between that amount
and minimum limits.
Insurer does not pay if insured recovers under Third Party section of an auto Policy.
No coverage for loss or damage due to radioactive material.
$300 deductible and maximum paid of $25,000.
No coverage if vehicle being operated by an excluded driver.
No coverage if person can recover from “unsatisfied judgment fund” or similar Fund.
Highway Victims Indemnity Funds
Text Edition: 2010
Last Updated: April 2012
Page 27 of 62
C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES


Victims of uninsured/unidentified motorists who do not have access to an automobile
policy are compensated.
In some Canadian provinces, this is financed by the government, in others by the
insurance industry:
o Government: Alberta, British Columbia, Manitoba, Ontario, Saskatchewan
o Industry (Facility Association): New Brunswick, Nova Scotia,
Newfoundland, Prince Edward Island.
o Quebec: Fonds d’indemnisation operated by the Société de l'assurance
automobile du Québec (Société or S.A.A.Q.), which provides the funds
supplemented by funds recovered from at-fault parties.
Operation of Funds



Provincial
The Fund steps in as though it were an insurer.
In Ontario, insured's own insurer pays first and can pursue recovery from an at-fault
third Party. There is no subrogation against the Fund by the insurer.
Provides Protection Against



Uninsured drivers (to the extent of their legal liability)
Drivers of stolen vehicles.
Uninsured or unidentified drivers hitting pedestrians.
What the Fund Provides




Up to minimum Third Party Liability limits for bodily injury in the province.
Property damage — if responsible driver is identified.
Investigation (after application to the fund and if it appears genuine)
If the owner and/or driver is identified, uninsured, and unable to pay, the Fund pays
to the extent of the uninsured driver’s liability.
o If liability is denied by the uninsured owner and/or driver, the victim may
have to sue to obtain judgment against the uninsured party, before payment
by the Fund.
o If the owner and/or driver is unidentified and the victim is not responsible, the
Fund will pay if it is satisfied that the victim is not responsible.
Recourse (if Fund pays)

Judgment is filed in court against the uninsured owner and/or driver and an
application is made to have the uninsured's driver’s license suspended until Fund
has been repaid. (uninsured may need to file a proof of financial responsibility before
the license is re-instated).
Study 9 – General Provisions, Definitions and Exclusions
Text Edition: 2010
Last Updated: April 2012
Page 28 of 62
C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Objectives
On completing this study, you should be able to:


summarize the content of each of the general provisions, definitions and exclusions;
demonstrate a clear understanding of the definition of "automobile" as it relates to an
automobile policy.
Introduction
Territory
No coverage outside of Canada or the U.S.A.
Spouse
Either of a man and a woman who:



are married to each other;
have together entered into a marriage that is voidable or void, in good faith on the
part of the person making a claim under the policy;
Have lived together in a conjugal relationship outside of marriage:
o continuously for a period of not less than three years; or
o in a relationship of some permanence if they are the natural or adoptive
parents of a child.
The separate definition of same-sex partner previously included the OAP 1 has been
eliminated a s there is no longer a need to di stinguish between spouses and same-sex
partners.
Automobiles Defined
Section 1.3 of the OAP 1 states:
"When we refer to the automobile, we mean:
o
o
o
o
o



a described automobile;
a newly acquired automobile;
a temporary substitute automobile;
other automobiles driven by you or your spouse who lives with you, or
trailers, in certain circumstances."
"Described" and "Newly Acquired" automobiles are owned by the insured.
"Temporary substitute" and "other" automobiles belong to someone else.
A trailer can be owned or non-owned.
Text Edition: 2010
Last Updated: April 2012
Page 29 of 62
C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES


A described automobile should be a vehicle that is registered in the name of the
policy holder, better known as the NAMED INSURED.
Section 2 of the OAP 1 specifies what automobiles are covered and defines each
one, as follows:
Described Automobile
A described automobile is any automobile or trailer specifically shown on your Certificate of
Automobile Insurance.
Newly Acquired Automobile
A newly acquired automobile is an automobile or trailer that you acquire as owner and that
is not covered under any other policy. It can be either a replacement or an additional
automobile. The replacement automobile will have the same coverage as the described
automobile it replaces. We(the insurer) will cover an additional automobile as long as:
o
o
we insure all automobiles you own, and
any claim you make for the additional automobile is made against a
coverage that we provide for all your other automobiles.
Your new automobile will be insured as long as you inform us (the insurer) within 14 days
from the time of delivery and pay any additional premium required.
In some cases the law may require us to inspect your newly acquired automobile within 10
days of the date you inform us that you acquired it. If you do not cooperate with any
reasonable arrangements we make to inspect it, claims under the Loss or Damage
coverages for the newly acquired automobile may be denied.
Coverage is not extended to a newly acquired automobile if you are in the business of
selling automobiles.
Temporary Substitute Automobile
A temporary substitute automobile is an automobile that is temporarily used while a
described automobile is out of service. The described automobile must not be in use by
anyone insured by this policy, because of its breakdown, repair, servicing, theft, sale or
destruction.
Coverage for a temporary substitute automobile is provided under the automobile policy of
the owner of the temporary substitute automobile. However, this policy may provide
coverage above and beyond coverage that the owner has purchased.
The following coverages apply to a temporary substitute automobile if a premium is shown
for them on the Certificate of Automobile Insurance for the described automobile that is
temporarily out of service:
o
o
o
Liability
Accident Benefits
Uninsured Automobile
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Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
o
Direct Compensation—Property Damage
Other Automobiles (Non Owned)
Automobiles, other than a described automobile, are also covered when driven by you, or
your spouse who lives with you.
The following coverages apply to other automobiles if a premium is shown for the coverage
on the Certificate of Automobile Insurance for a described automobile:
o
o
o
o
Liability
Accident Benefits
Uninsured Automobile
Direct Compensation—Property Damage
COVERAGES THAT EXTEND TO AUTOMOBILES OTHER THAN DESCRIBED AUTOMOBILES
Type of Auto- Coverage Purchased on Described Automobile
mobile
Liability
Accident
Uninsured Direct
Loss or
Benefits
Automobile Compensation Damage
Newly
Yes. The replacement auto has the same coverage Yes
Acquired Auto as the described automobile it replaces, as long as
(Replacement) you notify us within 14 days of delivery of the new
(Conditions
automobile.
Apply)
Auto
Newly
Yes. If we insure all automobiles you own for the
Yes
Acquired Auto same type of coverage on the day you take delivery
and you notify us within 14 days of delivery of the
(Additional
(Conditions
new automobile.
Auto)
Temporary
Substitute
Yes
Yes
Yes
Auto
Any Other
Yes
Yes
Yes
Auto
Owned Trailer Yes, if used in connection with an
(and not
automobile covered by the policy.
described)
Non-Owned Yes, if used in connection with an
Trailer
automobile covered by the policy.
Text Edition: 2010
Last Updated: April 2012
Yes
Apply)
Yes
Yes
(Conditions
Apply)
No
(Conditions
Apply)
No
No
No
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
AUTOMOBILES AND PERSONS INSURED
Automobile
Described Automobile
Section of Policy
Liability
Accident Benefits
Uninsured Automobile
Physical Damage
Newly Acquired
Automobile
Temporary Substitute
Automobile
Same as above
Person Insured
Anyone with consent
Anyone as per
Regulations
Anyone with consent
Anyone with consent
provided coverage was
purchased
Same as above
Liability
Accident Benefits
Anyone with consent
Anyone as per
Regulations
Uninsured Automobile
Anyone with consent
Legal Liability for
Anyone with consent if
Physical Damage
optional physical
damage cover was
purchased on the
described auto
Other Automobiles (Non Liability
Named insured and
Owned)
spouse
Accident Benefits
Anyone as per
Regulations
Uninsured Automobile
Named
insured/Spouse/Dependants
Trailers
Same as described automobiles above
Two or More Automobiles Insured
Under the Same Policy
When more than one automobile is insured under the same policy, each one will be treated
as if it were insured by a separate policy for the claims resulting from its use or operation.
Under More than One Policy
When two or more automobiles are insured as a described automobile under a separate
policy, each automobile will be covered by its respective policy. The amount paid under this
policy for any incident will be a fraction of the highest policy limit.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Definitions Continued
Trailers and Towing
An automobile pulling one or more trailers will be treated as a single automobile when
determining how much an insurer will pay under Liability, Accident Benefits and Uninsured
Automobile coverages. For Direct Compensation — Property Damage, a trailer will be
considered a separate vehicle when determining the deductible and how much will be paid.
Where two or more automobiles owned by different persons are attached to each other, the
insurer of each automobile will compensate its injured for losses according to the terms of
Direct Compensation — Property Damage coverage.
Excluded Uses
There is no coverage if the automobile is used to:



carry explosives;
radioactive materials; or
passengers for hire.
Excluded Driving
There is no coverage if the automobile is being:


operated by a person without the owner's consent; or
driven by someone specifically excluded from the policy.
Rented or Leased Automobile
Except for certain Accident Benefits coverage, there is no coverage under the policy if the
vehicle is rented to another.
Garage Workers Not Covered
Garage personnel are excluded from coverage under the Owner's Policy. They require a
Garage Policy (OAP 4), to cover them when working on a customer's vehicle.
War Risks Excluded
Such losses would be of a magnitude beyond the ability of private industry to absorb.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Study 10 – Statutory Conditions
Objectives
On completing this study, you should be able to:


state the purpose of the Statutory Conditions and their relationship to automobile
insurance policies;
demonstrate a thorough understanding of each Statutory Condition.
Introduction
The Statutory Conditions specify ways of dealing with various situations. Their intent is to protect
the rights of the insured and the insurer by stating clearly what is expected of each in given
circumstances.
Material Change in Risk
The insured is required to notify the insurer about changes which are material to the contract, and
within the knowledge of the insured.
Incorrect Classification, Premium Overpayment
Where an insurer incorrectly classifies a risk under an approved rating system, the insurer must
make a correction and if there was an overpayment, the insurer must refund it with interest.
Monthly Payments
This condition allows an insured to pay the premium in equal monthly instalments without penalty
but with interest payable at a rate governed by the regulations.
Authority to Drive and Prohibited Use
There is no coverage if the insured drives the vehicle:



if unauthorized, or allows others to operate the automobile while he or she is not
authorized to drive (no driver's license or driver's license in under suspension);
in any race or speed test; or
for an illicit or prohibited trade or transportation.
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Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Requirements Where Loss or Damage to Persons or Property
The insured's obligations are to:






give written notice of incident or claim;
verify:
o the claim arose from the operation of the automobile; and
o the person operating the automobile is a person insured;
forward immediately to insurer all writs, claims, correspondence, etc.;
not assume or admit liability;
not interfere with claims proceedings; and
co-operate with insurer.
Requirements Where Loss or Damage to Automobile
Requirements Where Loss or Damage to Automobile

When there has been a loss, the insured is required to:
o give written notice of loss;
o protect the automobile from further loss; and
o submit proof of loss within 90 days.

No repairs are to be made except those necessary to prevent further loss and no
removal of any evidence of damage unless:
o the insurer gives written consent; or
o there has been a reasonable time for the insurer to examine the automobile.

The insurer may require the insured to submit to an examination under oath and to
present all documents pertaining to loss.

The insurer's maximum liability is the least of:
o the actual cash value of the automobile; or
o the cost to repair, rebuild, or replace with like kind and quality.

The insurer may choose to repair, rebuild, or replace the damaged automobile
subject to the following:
o written notice of its intention is given to insured within seven days of receipt
of proof of loss;
o repairs, etc. are of like kind and quality;
o repairs, etc. are made within a reasonable time.

The insured may not abandon the automobile to the insurer without the insurer's
consent, when it is a total loss.

Salvage belongs to the insurer if the insurer pays the actual cash value of the
automobile or exercises its option to replace the automobile.
Text Edition: 2010
Last Updated: April 2012
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Time Limit
The insured is to give notice to insurer within seven days of the incident or, if incapacitated,
as soon as possible.
Inspection of Automobile
Insurer has the right to inspect the automobile at any time (pre and post loss)
Time and Manner of Payment of Insurance Money




Payment within 60 days of receipt of proof of loss.
Prompt written notice, with reasons, if claim is denied.
Insured must comply with Statutory Conditions 5 and 6 before any action may be
taken.
Time limits apply to when action may be taken.
Who May Give Notice and Proofs of Claim
Who May Give Notice and Proofs of Claim
If the insured is unable or refuses to do so, the following persons may do so:


Agent of insured (example-legal representation).
Person to whom the insurance money is payable (example-lessor).
Termination
The insured may cancel at any time:



No special conditions apply.
Refund premium on short rate basis subject to minimum retained premium.
Refund payment to be made as soon as possible.
The insurer may terminate policy by following strict conditions:


Reason for termination must be valid within the terms of the Automobile Insurance
Act and the Insurance Act.
Must give 15 days written notice by registered mail.
OR



Give 5 days written notice, personally delivered.
Refund premium on pro rata basis subject to minimum retained premium.
Refund payment must accompany notice of cancellation unless premium is subject
to adjustment — then it must follow as soon as possible.
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Last Updated: April 2012
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Notice


From insured to insurer — by registered letter.
From insurer to insured — hand-delivered or by registered letter (notice begins to
run on the day following receipt of the registered letter at the post office).
Statutory Accident Benefits Protected
An insured is entitled to some, but not all, Statutory Accident Benefits if her or she
contravenes certain Statutory Conditions.
Text Edition: 2010
Last Updated: April 2012
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Study 11 – Endorsements for use with Owner’s Policies;
The Driver’s Policy
Objectives
On completing this study, you should be able to:




state the purpose of endorsements;
identify the situations that require adding endorsements to owners' policies;
explain the major provisions contained in the endorsements discussed in this study;
state the purpose of a Driver's automobile policy and outline its main feature.
Introduction
Introduction
In Ontario, automobile endorsements are called Ontario Policy Change Forms (OPCF). All
insurers use standard forms. It is important that you know that specific forms exist for
specific purposes, and that you are able to recognize a situation that calls for a particular
endorsement.
Drive Other Automobiles (OPCF 2)
This endorsement expands on the definition of insured person for the purpose of Third Party
Liability coverage when operating a non-owned or other automobile.
Government Owned Automobiles (OPCF 3)
The person covered by this endorsement is the insured and not the government authority
that actually owns the automobile.
The special conditions applicable to this endorsement are as follows:


No more than one automobile owned by the government is in the care of the insured
at one time.
Coverage under this endorsement is subject to a limit per occurrence under the
physical damage section.
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Last Updated: April 2012
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Permission (OPCF 4 series)
There are a number of endorsements that grant permission for the insured to use the
automobile for purposes otherwise excluded, such as:


permission to carry specific types of explosives; or
permission for the carriage of radioactive materials.
Rented or Leased Automobiles (OPCF 5 series)
These endorsements grant permission for the automobile to be leased on a short or long
term basis.
Conversion (OPCF 5D)
If a lessee disappears with the vehicle, a policy with this endorsement will pay the loss,
assuming theft is otherwise covered under the policy. Coverage is subject to a deductible.
OPCF 6 Series to OPCF 23 Series
Passenger Risks (OPCF 6 series)
If an automobile owner carries passengers for compensation or hire, it usually means that
the occurrence of a loss is more likely simply because the vehicle is on the road more (e.g.,
a taxicab). Each endorsement is designed for a particular purpose.




Taxis, private buses, car pools.
School buses:
o Passenger hazard
o Property damage
Public buses:
o Specific limits for the passenger B.I. or D.D. or single limit passenger hazard.
Commercial driver training school.
Property Damage Reimbursement (OPCF 8)
This endorsement adds a property damage deductible. This is mainly used when heavy
vehicles such as trucks are insured.
Amphibious Vehicles (OPCF 9)
The endorsement excludes the marine use of these vehicles.
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Restricting Glass Coverage (OPCF 13)
This limits glass coverage under Comprehensive to specified perils. An underwriter may
insist on this endorsement if an insured makes frequent glass claims.
Suspension and Reinstatement of Coverage (OPCF 16 and 17)
An insured may wish to suspend coverage for a given period of time. An insured may wish to
park a vehicle during the winter or an extended vacation. Certain coverages remain in force
during the suspension.
Amount Paid (OPCF 19 series)
This endorsement was designed to limit the settlement on an automobile, specifically in
cases where the actual cash value (ACV) exceeds the rating values used in automobile
rating manuals. The endorsement restricts settlement under section 7 to the lesser of ACV
or the amount noted on the endorsement.
Coverage for Transportation Replacement (OPCF 20)
This is used to increase the limit for Loss of Use coverage. Loss of use arising out of other
perils covered by the physical damage section of the policy may also be covered with this
endorsement.
Damage to Property of Passengers (OPCF 22)
An endorsement is available with a specified limit of liability for the property of passengers.
Mortgagees and Lienholders (OPCF 23 series)
There are two different endorsements noted here in this series — a standard mortgage
endorsement and a broad form mortgage endorsement.
Alteration (Changes) (OPCF 25A)
The following changes can be made with this one endorsement:








change of name or address of insured;
substitution of automobile;
addition of automobile;
deletion of automobile;
change in coverage or limits;
addition of coverage;
deletion of coverage;
change in rating classification.
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Last Updated: April 2012
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Liability for Damage to Non-owned vehicles and Providing Other Coverages When Insured
Persons Drive Other Automobiles (OPCF 27 series)
The purpose of this endorsement is to provide legal liability protection for physical damage
to a non-owned vehicle and extend Third Party Liability coverage to the individuals listed.
The coverage is applicable where it can be shown that:


the insured is legally liable or has agreed under a contract or agreement to be
responsible for damage; and
an insured peril caused the damage.
This endorsement provides coverage against the same perils as are stated in the physical
damage section of the Owner's Policy.
OPCF 25A to OPCF 47
Excluding, Reducing or Increasing Coverage for Named Persons (OPCF 28 series and OPCF 29)
One endorsement restricts the amount of coverage when certain individuals are operating
the vehicles; e.g., in the case of a poor driver. Another endorsement add coverage for
specified drivers.
It is possible to exclude a named driver from all coverage except certain Accident Benefits.
Motorized Recreational Vehicles (OPCF 32)
An endorsement is required to waive the Statutory Conditions pertaining to qualification and
age of the operator of the vehicle.
Coverage for Emergency Road Service (OPCF 35)
This endorsement provides up to $50 coverage for each time the insured automobile is
disabled and requires emergency road service. It does not apply to the cost of parts or
supplies, oil, gasoline, batteries or tires.
Fire and Theft Deductible (OPCF 40)
A fire and theft deductible endorsement may be added to the policy which extends the
deductible under All Perils, Comprehensive or Specified Perils to losses caused by fire or
theft of the entire automobile.
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Removing Depreciation Deduction (OPCF 43)
When this endorsement is purchased, the insurer waives the application of depreciation for
the repair or total loss of the insured vehicle should it be damaged by an insured peril.
The endorsement does not apply to tires and batteries.
Family Protection Endorsement (OPCF 44R)
When the insured cannot fully recover his or her damages for bodily injury or death, this
endorsement covers the difference between the value of the insured's claims and the third
party's limit of liability insurance.
Agreement Not to Rely on SABS Priority of Payment Rules (OPCF47)
This endorsement allows persons who might otherwise have to claim SABS under another
policy, to claim under this policy.
Driver`s Automobile Policy (OAP 2)
Driver's Automobile Policy (OAP 2)
The most frequent use is to facilitate filing proof of financial responsibility to obtain a driver's
license for commercial purposes.
In this policy, a non-owned automobile is defined as:



one which the insured is in control of personally as driver or occupant, and that is
neither owned by nor registered to the insured;
one that is in the care, custody or control of the insured, but is not operated by the
insured; or
a trailer or semi-trailer an automobile and attached trailer are considered one vehicle
with respect to the limits of liability under this policy.
Coverage
The basic coverage provided is Liability, but the policy may be extended by endorsement to
cover legal liability for damage to non-owned automobiles in the care, custody, or control of
the insured.
Rating
Bodily injury and property damage are rated based on the highest exposure, and this
depends on the type of automobile the applicant is likely to drive. There is a minimum
premium for standard limits; garage personnel are charged a higher rate than others.
Text Edition: 2010
Last Updated: April 2012
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Study 12 – Regulation of Automobile Insurance in Ontario;
Consumer Protection
Objectives
On completing this study, you should be able to:


state how and by whom insurance is regulated in Ontario;
list the major areas in which consumer protection legislation has been effected and
briefly explain the main provisions in each care.
Regulatory Structure
The Financial Services Commission of Ontario Act, 1997, created a regulatory structure to
administer insurance in Ontario.






The Financial Services Commission of Ontario (FSCO), regulates insurance,
pension plans, loan and trust companies, credit unions and caisses populaires,
mortgage brokers, and co-operatives.
It Contains three elements:
o The Commission or "Board"
o Financial Services Tribunal
o Superintendent of Financial Services
The Commission has five members: the Chair, two Vice-Chairs, The Director of
Arbitrations, and the Superintendent of Financial Services.
The Director of Arbitrations handles automobile insurance dispute resolutions.
The Financial Services Tribunal hears appeals of regulatory decisions.
The Superintendent of Financial Services administers and enforces the Act.
Consumer Protection Legislation
The Insurance Act includes provisions to protect consumers.
Specified in the regulations is the information to be given to applicants and insureds. On the
request of an applicant, a broker must provide names of all insurers who the broker has an
agency contract for automobile insurance with.
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Last Updated: April 2012
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Unfair or Deceptive Acts and Practices
Under the provisions of Part XIX of the Insurance Act, the Superintendent or a person
designated may direct to any insurer and inquiry to the contracts, financial affairs, or the
acts and practices of the insurer. They may also at any reasonable time examine the books,
securities, documents, and things related to the business of the insurer, agent, or adjuster.
They may also request the following:



Any contract of insurance issued by an insurer.
Any settlement or adjustment under a contract of insurance.
Any activities relating to the business of insurance.
An insured person on request shall furnish the superintendent with full information on any
contract of insurance or any settlement or adjustment affecting the insured person under a
contract of insurance.
Brokers are regulated by the Registered Insurance Brokers Act which prescribe proper
conduct and practices to protect consumers and provide penalties for misconduct.
It can be seen that the Superintendent has a wide range of powers to investigate and call for
information.
Section 438 of the Insurance Act outlines the definition of unfair or deceptive acts and
practices in the business of insurance.
Section 439 of the Insurance Act states
"No person shall engage in any unfair or deceptive act or practice."
Section 440 of the Insurance act authorizes the Superintendent to give notice to any person
violating the act to:



cease or refrain from doing any act or pursuing any course of conduct identified by
the Superintendent;
cease engaging in the business of insurance or any aspect of the business of
insurance specified by the Superintendent; or
perform such acts as are necessary to remedy the situation.
A person has a limited time to request a hearing by written notice to the Superintendent.
Text Edition: 2010
Last Updated: April 2012
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Registered Insurance Brokers of Ontario (RIBO)
Section 15 of the Regulations to the Registered Insurance Brokers Act (RIBO Act) defines
"misconduct", with provisions very similar to the ones found in the Insurance Act.
Section 16 and 17 of the Regulation to the RIBO Act set out the provisions relating to trust
funds.
Section 20 outlines a broker's own insurance requirements.
Section 22 states the penalties that may be levied against a member for misconduct.
Cancellation, Refusal to Renew
Section 238 of the Insurance Act gives the Superintendent the authority to:


establish requirements that must be met before an insurer declines to issue,
terminates, or refuses to renew a contract of automobile insurance;
prescribe grounds for which an insurer cannot decline to issue, terminate, or refuse
to renew a contract of automobile insurance.
New Renewal Procedures
Section 236 of the Insurance Act outlines the requirements of the insurer in the event of a
non-renewal of policies. Failure to follow prescribed procedures could have grave
consequences for the broker and the insurer.
Links and External Resources
Financial Services Commission of Ontario
http://www.fsco.gov.on.ca/
Insurance Act
http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90i08_e.htm
Registered Insurance Brokers of Ontario
http://www.ribo.com/
Text Edition: 2010
Last Updated: April 2012
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Study 13 – Underwriting
Objectives
On completing this study, you should be able to:


specify what constitutes underwriting;
differentiate between head office and individual underwriting by explaining the
functions of each.
Introduction
Underwriting comprises:
1. Consideration of the acceptance or rejection of a risk.
2. If the risk is accepted, the terms of the policy.
3. The premium for the policy.
Most modern insurers write large volumes of similar risks, and their underwriters carry out
risk screening and rate allocation.
Head Office Underwriting
Underwriting Philosophy
Every insurer puts its expertise to work by creating underwriting and rate manuals, and
systems of operation to attract and classify profitable business.
An insurer's automobile underwriting manual for all branches might include:





an acceptance/rejection list;
a "senior underwriter online" acceptance list;
a limit table(the maximum liability limits which can be accepted);
a classification guide; and
other instructional material.
The more comprehensive the underwriting manual, the greater the description provided for
acceptable risks, and the more likely it is that corporate goals will be met.
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Last Updated: April 2012
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Limit Tables and Acceptance Lists
The underwriting manual includes a limit table for Section A limits, based on the insurer's
reinsurance treaties and to what extent the insurer is willing to expose its own net account.
Some insurers may be willing to increase Accident Benefits coverages, or permit multiples of
the limit, while others restrict Accident Benefits to the provincial minimums, with their
willingness to do so dependant on their underwriting philosophy, financial strength, and
reinsurance treaties.
All available policy extensions and endorsements are dealt with in the manual and
underwriters must be thoroughly familiar with these.
Some screening, rejecting, and rating is now done by computer with some "intelligent
underwriting" computer programs that have been developed; they handle the risk selection
process by point allocation or by "flagging" the underwriter on the computer screen. It is the
insurer's responsibility to give the underwriters the systems, manuals, and computer
programs they need to carry out the underwriting process.
Individual Underwriting
Underwriting has increasingly become a function of ensuring new applications and
requested changes conform with the insurer's policies for acceptance, or referral to a higher
authority. The following functions are typical:
1.
2.
3.
4.
Classification
Rating drivers according to driving records.
Placing risks in the correct rate groups.
Using correct endorsements — underwriters must understand and correctly use
endorsements, of which there are two kinds:
o Extensions
o Agreements or Restrictions
Underwriters must use their training and common sense, and they have a duty to the public
and their employers to avoid mistakes — which are embarrassing and might result in
penalties from industry regulators.
There are some particularly sensitive areas:






Policy cancellation for underwriting reasons.
An insurer's refusal to renew.
Premium surcharges.
Notice to lienholders and to those with whom a certificate of insurance has been
filed.
Premiums appropriate to the risk — no more and no less.
The use of, or improper use of, credit information.
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Last Updated: April 2012
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Underwriters must carry out their duties conscientiously and efficiently, and know their
underwriting and rating manuals thoroughly if they wish to succeed in the industry.
Underwriting in Saskatchewan, British Columbia, and Manitoba
Government and Private Insurers Operate in these Provinces







Automobile insurance is underwritten in these provinces by the government body
responsible for automobile insurance and by private insurers.
The government insurer is the sole underwriter of the legislated basic coverages.
Government insurers can not decline risks and must provide the basic coverages.
Underwriting criteria such as age, gender, marital status and region of the province
may also be prohibited on the basis that they are deemed discriminatory.
As such, the main underwriting function is to determine the proper rate group.
Some underwriting is exercised in issuing "Special Coverage."
But this mostly involved routine things such as verifying certain information.
Underwriting by Private Insurers




Private companies use requirements such as accident-free status and driving
experience for underwriting; and
provide coverages for mostly private passenger vehicles and recreational vehicles
such as motor homes;
they may also provide additional coverages subject to certain restrictions;
within these constraints, the private sector practices underwriting in the "traditional"
manner as outlined earlier.
No Residual Market


There is currently no Facility Association or Risk Plan in these provinces.
They are not needed since drivers can obtain basic coverage from the government
insurer.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Study 14 – Automobile Insurance Ratemaking
Objectives
On completing this study, you should be able to:


describe the factors that enter into and the process of automobile ratemaking;
comment on the extent of government control of automobile insurance rates in
various provinces.
Factors in Ratemaking
Major Classes
Automobile risks are usually divided into the following major classes:






Private passenger risks (pleasure and business use)
Commercial vehicles (trucks and delivery autos)
Public automobiles (buses and taxicabs)
Recreational vehicles (motorcycles, snowmobiles, ATVs)
Garage risks (road hazard and dealership risks)
Non-owned automobiles
Hazard Considerations
Each risk is then considered based on the hazard presented by any or all of the following:




territory;
class of automobile and its uses;
drivers;
the automobile itself.
Ratemaking
Insurance rating is different than other retail markets: the ratemaker has to fix the selling
price before all the costs are known.
Text Edition: 2010
Last Updated: April 2012
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Statistical and Actuarial Rating




The Law of Large Numbers can be applied to individual risks by keeping statistical
loss records on a large number of such risks.
These numbers can be tabulated and analyzed by statisticians, and the resulting
statistics are used by actuaries to establish rates for various coverages.
Rates can be modified to reflect the insurer's competitive philosophy, the market,
and political considerations.
Final premiums are submitted for approval to the provincial Superintendent of
Insurance or to a rating board.
Components of Rate
There are two components of an automobile insurance rate:
1. Pure Premium - this is the amount required to pay only the anticipated losses;
2. Expense Loading - added to the pure premium and includes:
o
o
o
o
o
acquisition costs;
processing and servicing costs;
taxes;
contingencies;
profit.
Statistical Body and Data Collection
Private automobile insurers who write business in Canada, record and file their experience
data as a way to provide industry-wide statistics for analysis by regulators and ratemakers.
These results are published annually in the Green Book and exhibit a five-year history for
various types of vehicles:









Private passenger automobiles—excluding farm vehicles
Farmers' private passenger automobiles
Commercial automobiles
Snow vehicles
Motorcycles
Inter-urban trucks
Public classes (buses, taxis)
Garages
Some miscellaneous classes
This data is exhibited per:


policy year; and
accident year.
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Accident year data is now preferred over policy year data by actuaries and regulators, and
policy year is falling into disuse.
Components of Loss Costs
Loss costs include:



paid losses — known amounts;
outstanding losses — provision for reported, but not yet paid, claims; and
incurred but not reported losses (I.B.N.R.) — late reported claims can significantly
affect the final loss costs for the period under review. Using accident year data,
actuaries must calculate the I.B.N.R. using historically demonstrated factors and add
it to incurred losses.
Actual Loss Ratio and Pure Premium Exhibits
The Green Book shows loss costs ratioed to the earned premiums in the actual loss ratio
exhibit — known as the earned loss ratio — and as pure premium exhibits. Loss costs
are expressed by coverage per vehicle insured for all provinces, territories, years, classes
and coverages.
Example
Province of Nova Scotia, Private Passenger, Year 20XX
Coverage — Third Party Liability
Claim Frequency per 100 vehicles 5.13
Average cost per claim $3704.00
Average earned premium $155.21
Claim cost per vehicle $189.99
Earned/incurred loss ratio 122%
Trending
Actuaries forecast trends in loss costs. For example, if collision loss costs are increasing
0.5% per month, then an actuary can forecast a trend of an increase of 6% annually.
Use of Base Rates, Relativities and Differentials
Because of the tremendous amount of data developed, relativities are extracted from loss
costs, and the resulting differential is applied to the base future rate to provide the premium.
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This is shown by the example below:



Actual $250 Collision deductible loss costs $150—this is the base rate because the
$250 deductible is purchased by most people.
Actual $100 Collision deductible loss costs $165.
Actual $500 Collision deductible loss costs $135.
The actuary will usually pick the category with the greatest number of insureds as a base.
Vehicle Rate Groups




Vehicle ratings used to be based solely on the vehicle's value when new, now they
are based on various factors such as:
o damageability;
o reparability; and
o part availability.
The Highway Loss Data Institute (HLDI) has provided data on loss costs per vehicle,
taking into account these factors. Equivalent Canadian data is calculated by the
Vehicle Information Centre of Canada (VICC).
With the direct compensation plans in effect in Quebec and Ontario, rate groups are
also in use for Section A coverage.
Data concerning the susceptibility of occupants to injury will likely emerge as a rating
factor for Accident Benefits.
The example below outlines how rate groups can be applied:
While the owner of a Mercedes may pay a higher Collision premium than an owner of a
Hyundai, the occupants of the Mercedes may be much safer than in a smaller, lighter
vehicle and that different in safety may someday be reflected in Accident Benefit premiums.
Other Factors

Insurers have their own data that they use to fine tune their rates and to justify them
to rating boards.
Final Premiums
Investment Income

The insurer's use of monies earned from premiums and on loss reserves has been
subject to close scrutiny by regulators and politician interested in the overall return
on equity when determining permitted rate levels.
Text Edition: 2010
Last Updated: April 2012
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Rate Control
The following provinces have established rating boards to control automobile insurance
rates:






Alberta
Manitoba
New Brunswick
Newfoundland
Nova Scotia
Ontario
The control exercised varies:






Prior approval — companies file their rates and must wait for approval before
implementing them.
File and use — companies file proposed rates and use them as proposed, but may
face enquiries by the board.
File and use following a "deemer" period—proposed rates are filed and the law
allows a period of time (such as 30 or 60 days) during which the board can challenge
them; following this period, the company can use any unchallenged rates as they are
then deemed to be approved.
Prior settings of rates by the board with variations from "benchmark"—the board sets
the rate and insurers can use this rate or vary them, based on a board-approved
percentage.
Expense Loading — added to the projected loss costs.
Final adjustment — actuarially-calculated premiums are reviewed by senior
management and adjusted for the market, competition, and political reasons.
Text Edition: 2010
Last Updated: April 2012
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Study 15 – Industry Programs for Insurance Availability
Objectives
On completing this study, you should be able to:




explain why insurance must be available to every licensed driver;
state the primary objectives of a residual market program;
describe the functions and operation of both the Facility Association and the Risk
Sharing Plan including how premiums and losses are apportioned by each one;
show why those provinces having government operated automobile insurance plans
have no need for residual market programs.
General Considerations
Insurance must be available to all licensed drivers. Programs have been set up by the
insurance industry to ensure that coverage is available to all.
The history of automobile insurance in Canada has shown that it is more subject than most
other types of property/casualty insurance to periodic cycles of rate inadequacy and severe
underwriting losses. As a result of such times, a "tight" market for automobile insurance will
occur due to individual company underwriters making adjustments to their normal standards
of risk acceptability.
The primary objective of any special industry program should include:


the immediate availability of a market to brokers/agents and the public; and
equitable sharing of the residual market by all insurers.
To develop a residual market program, it is essential that it have the support and
cooperation of all segments of the industry.
The Facility Association


Created January 28, 1977.
Facility Association is an unincorporated nonprofit Association of insurers who
provide automobile insurance for owners and operators of motor vehicles who may
otherwise have difficulty obtaining such insurance through a regular market.
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Last Updated: April 2012
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Jurisdiction, Legislative Authority and Date of Commencement
Alberta
The Alberta Insurance Act
October 1, 1979
New Brunswick
The Insurance Act of New
Brunswick
July 1, 1983
Newfoundland
The Insurance Act of
Newfoundland
November 1, 1985
Northwest Territories and
Nunavut
Northwest Territories
Insurance Act
December 1, 1986
Nova Scotia
The Insurance Act of Nova
Scotia
July 1, 1981
Ontario
The Compulsory Automobile
Insurance Act
December 1, 1979
Prince Edward Island
The Insurance Act of Prince
Edward Island
September 1, 1982
Yukon Territory
Yukon Insurance Act
April 30, 1986
Plan of Operation
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The operations of the Association are conducted in accordance with the Plan of
Operation approved by the members and regulatory authorities.
In each jurisdiction, the insurer licensed to write automobile liability insurance must
be a member of the Association.
The underwriting and claims functions are provided by a limited number of
designated members who are compensated by operating and service fees.
Servicing carriers are not permitted to write risks unless they qualify for the "residual
market segment," which in Ontario, means they qualify after being refused by the
regular market.
The Compulsory Automobile Insurance Act of Ontario states that an agent or broker
must provide an application of automobile insurance.
Rules of Operation
The Association maintains the following manuals:
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Accounting and Statistical Manual
Manual of Rules and Rates
Claims Guide
Risk Sharing Pool Procedures Manual
Sharing of Results
All insurers who write automobile liability insurance in each jurisdiction are members of the
Association and share in the results.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Servicing Carriers
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Servicing carriers issue policies and provide brokers/agents with policyholder
service.
Insurers not so designated are referred to as non-servicing carriers, and while full
members of the Association, have no direct involvement in the day-to-day operation
of the program.
Board of Directors
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Elected members are senior officials in member companies.
Contains three broker members (one representing Alberta, Northwest Territories and
Nunavut, one from Ontario, one from Atlantic provinces).
Appoints a President and Chief Executive Officer of the Association as well as an
Operating Committee for each jurisdiction.
Agents and Brokers
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An agent/broker may place a client having difficulty finding insurance with the
Facility Association.
May aid the client in filling out the application which will show the name of the
servicing carrier.
Rates used are the ones in the Association rate manual and the agent/broker may
bind coverage in the name of the servicing carrier.
Upon receipt of the application, the servicing carrier issues a policy and provides all
other services.
In Ontario, the Association rates do not include a commission and Agents/Brokers
add on a fee in accordance with a schedule agreed upon between the Insurance
Brokers Association of Ontario and the Financial Services Commission of Ontario.
Premium Deposits
All premiums received and claims payments are processed through a special account with a
bank designated by the Facility.
Special Carrier Compensation
Servicing Carriers receive expense allowances agreed to by the members to compensate
them for the cost of acting on behalf of the Association.
Text Edition: 2010
Last Updated: April 2012
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The Risk Sharing Plan
Quebec
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The plan is administered by The Groupement des assureurs automobiles (G.A.A.).
Called the P.R.R. (from the French name Plan de répartition des risques).
All automobile insurers licensed in Quebec to write Third Party Liability insurance
are participants in the P.R.R.
P.R.R. is a mechanism that allows an insurer to transfer into a shared pool and risk
that does not meets its underwriting criteria.
No standard rates are used and the risk is transferred for the standard premium set
by the insurer. Higher risks will be surcharged by specified percentage.
The risk may be transferred or withdrawn from the P.R.R. at any time within a policy
period.
The P.R.R. gives back to the insurer an allowance of the premium to cover the policy
issue and it's servicing and claims costs.
The decision to transfer the risk is made by the insurer and insureds are very seldom
aware.
Industry Costs
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Operations of the Association and Risk Sharing Plan need to be subsidized by the
industry.
British Columbia
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There is no need for special programs since ICBC is obligated by the Insurance Act
to provide coverage to all person.
Private insurers compete for extension coverages.
Manitoba and Saskatchewan
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There are no industry or government programs since the government insurers must
provide basic coverage.
Private insurers compete for extension coverages.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Study 16 – Quebec Plan
Objectives
On completing this study, you should be able to:
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explain who provides automobile insurance in Quebec and the legislation that
regulates it;
outline the coverages available.
The Automobile Insurance Act
Introduction
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The compulsory basic plan involves both government and private insurers.
Third Party Liability coverage is purchased through private insurers.
Accident Benefits are purchased through the government plan.
The Automobile Insurance Act
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Implemented March 1, 1978.
Created the Societé de l'assurance automobile du Québec (S.A.A.Q.).
The Automobile Insurance Act makes provision for:
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compensation for bodily injury;
compensation for property damage;
indemnity fund;
groupement des assureurs automobiles (G.A.A.).
Compensation for Bodily Injury
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The Société provides no fault bodily injury and death benefits to:
o Quebec residents, in respect of accidents occurring in and out of the
Province of Quebec; and
o non-residents (but only to the extent they were not at fault).
Tort was abolished for bodily injury and death in Quebec.
Quebec residents get Société benefits outside Quebec, and retain the right to sue
outside Quebec.
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Last Updated: April 2012
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No-Fault Benefits
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Income replacement up to 90 percent net income, subject to a maximum net income.
Funeral expenses, variable amounts.
Lump sum for death.
Lump sum for disfigurement, dismemberment, suffering, or loss of enjoyment of life
— up to a limit Schedule for type of disfigurement and associated lump sum.
S.A.A.Q. also administers the Québec Highway Victims Indemnity Fund, called "Le
Fonds d'indemnisation" (or "the Fonds") — it is funded by the Société (in turn by the
monitory public), supplemented by amounts recovered from liable parties (The right
to sue under tort remains in Quebec for property damage claims from insurers not
licensed to write automobile insurance in Quebec or if the damaged vehicle was in
the care, custody, or control of a garage).
Direct Compensation Agreement (Physical Damage) using driver fault charts — each
liability insurer indemnifies its own insured to the extent that the driver of the other
automobile is at fault.
Definitions of Damages Covered Under D.C. Agreement
Direct Compensation Agreement
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It covers:
o damages to the automobile;
o loss of use;
o loss of personal effects and commercial property carried in or on the vehicle
and belonging to the insured, up to a maximum amount.
All automobile insurers licensed in Quebec are bound by the Direct Compensation
Agreement, and waive subrogation rights amongst themselves (unless the vehicle is
in the care, custody and control of a garage).
G.A.A. acts like the Facility and guarantees a market.
Membership in G.A.A. is compulsory for all insurers licenced for automobile
insurance in Quebec.
Section 84 makes third party property damage insurance compulsory for the owner
of any automobile operating in Quebec.
Negligence is applied by Driver Fault Chats — these may be challenged by an
insured "in accordance with the ordinary rules of law" to the insured's advantage,
i.e., the payment to the insured under the charts may be increased, if the insured
succeeds, but not decreased.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Study 17 – Saskatchewan; Manitoba, British Columbia; Alberta; New
Brunswick; Newfoundland; Nova Scotia, and P.E.I.
Objectives
On completing this study, you should be able to:
For each of the above provinces:
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Explain how coverage is provided and by whom.
Outline the basic compulsory coverages including limits.
For each of Saskatchewan, Manitoba and British Columbia:
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Explain why Standard Policy Forms are not issued for basic coverage under
government insurance plans.
State what additional coverages are available and from whom.
For each of Alberta, Newfoundland, Nova Scotia, and Prince Edward Island:
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Define tort.
Explain how insured’s are compensated for vehicle damage under tort-based
automobile insurance schemes.
For New Brunswick:
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Explain why fault must still be determined when settling Direct Compensation
Property Damage claims, and how it is determined.
Saskatchewan
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First province to develop government insurance plan — April 1, 1946.
Premium payable on every motor vehicle licence at the time the licence plate is
purchased.
No policy is issued — Insurance Act defines the coverages.
Basic compulsory coverages are Third Party Liability, Personal Injury Benefits, and
Comprehensive insurance.
Increased limits and reduced deductible may be purchased through SGI CANADA or
through private insurers.
The Personal Injury Protection Plan Act and Regulations came into effect January 1,
1995 to provide a no-fault personal injury benefits plan.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
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A choice in Accident Benefits coverage was offered in 2004, adding a tort option in
addition to the no-fault option.
In Saskatchewan, Comprehensive insurance includes collision and upset, thus
making it similar to All Perils coverage under a standard policy.
The Personal Auto Injury Insurance Guide published by SGI explains the no-fault coverages
in detail.
Manitoba
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The Manitoba Public Insurance Corporation Act implemented the automobile
insurance plan known as Autopac in 1971.
A no-fault system was implemented in March 1994 called the Personal Injury
Protection Plan (PIPP).
Basic compulsory coverage consists of basic of minimum limits Third Party Liability,
Personal Injury Protection, and All Perils Physical Damage coverage.
A policy is not issued for the basic plan.
Autopac has a merit discount program to encourage safe driving, while those having
accidents pay premium surcharges.
Extension insurance to increase limits or reduce deductibles may be purchased from
Autopac or from private insurers.
PIPP does not restrict a person from proceeding with a claim against a third party
who is outside the province or a vehicle not covered under Autopac.
The 2008 Policy Guide issued by the Manitoba Public Insurance Corporation explains these
coverages in greater detail.
British Columbia
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The Insurance Corporation of British Columbia (ICBC) was set up April 19, 1973
after the Insurance Corporation of British Columbia Act was passed.
The Automobile Insurance Act was passed at the same time, setting up Autoplan.
Every licenced vehicle owner much purchase basic Autoplan insurance when
registering a vehicle (purchasing licence plates).
There is no policy and the vehicle registration serves as evidence of insurance.
Higher liability Third Party Liability limits, higher Accident Benefit limits and physical
damage coverage may be purchased from ICBC or from private insurers.
The booklet Getting Started with Basic Autoplan published by ICBC explains the coverages
available from ICBC in greater detail.
Text Edition: 2010
Last Updated: April 2012
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C14 ONTARIO ONLINE TUTORIAL • TUTOR’S NOTES
Alberta, Newfoundland, Nova Scotia, and Prince Edward Island
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These provinces have tort-based systems with automobile insurance offered entirely
by private sector companies.
Accident Benefits are mandatory in all these provinces, except Newfoundland.
Minimum mandatory limits of Third Party Liability are in effect for all provinces.
The Third Party Liability limit is $200,000, except in Nova Scotia where it is
$500,000.
The standard Owner's Policy (SPF 1), standard endorsement form (SEF) and
standard application form (SAF) are all used—though there are variations in wording
and coverage between provinces.
Accident Benefits consist of modest amounts, set out in the policy or separate
schedules, with various limits. (Insurers in Nova Scotia are obligated to offer optional
supplementary Accident Benefits that increase limits or durations).
In Alberta, Uninsured Motorist coverage is provided under Accident Benefits—
Subsection 3.
Insureds have the option of purchasing own damage coverage based on their needs
with deductibles for all sections except fire, lighting, or theft of the entire vehicle.
All policies are subject to statutory conditions as set our in each province's
Insurance Act.
New Brunswick
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Accident Benefits are madatary and the minimum Third Party Liability limit is
$200,000.
Direct compensation for vehicle damage was introduced in January 2005.
Coverages under SPF 1 are the same as Alberta, Newfoundland, Nova Scotia and
P.E.I. except that New Brunswick has Direct Compensation — Property Damage
coverage under Section A.1.
Text Edition: 2010
Last Updated: April 2012
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