I. Third-Party Liability Coverage: Who pays for damages if I am injured, but it is not my fault?
In Ontario, if you are injured in a motor vehicle accident you may commence a lawsuit against an at-fault driver to compensate for your injuries and losses. Usually, the at-fault driver’s own insurance company will cover the defence costs and the settlement or verdict of the at-fault driver. This coverage is known as “third-party liability coverage”.
The Financial Services Commission of Ontario governs the insurance industry. It defines third-party liability coverage as coverage that: “protects you if someone else is killed or injured, or their property is damaged. It will pay for claims as a result of lawsuits up to the limit of the coverage, and will pay the costs of settling the claims. By law all drivers must carry a minimum of $200,000 in third-party liability coverage.”1
While the law requires that drivers must carry this minimum amount, most policies in Ontario have $1,000,000 third-party liability coverage. It is prudent to have at least $1,000,000 coverage or more if you can afford it. In many instances injured victims will require more than $200,000 in damages. Another factor to consider is the coverage you need if you are badly injured and the other driver’s policy limit is insufficient. If you have more than $1,000,000 coverage, you will be better protected for your own injuries, as will be discussed below.
II. Uninsured and unidentified claims: What if I am involved in an accident where the person does not have insurance?
Many people wonder, “What if I am involved in an accident where the person does not have insurance?” or “If I am a victim of a hit and run, and there is no third-party liability insurance available?” In situations like these, where an at-fault driver has no insurance, or you were a victim of a hit and run, you have access to the uninsured motorist coverage provided by your insurance policy.
The Ontario Insurance Act section 265 legislates that all people must have uninsured coverage. This means that every insurance contract or policy must have coverage for injuries caused by uninsured and unidentified drivers. This is known as “section 265 coverage”.
If a situation arises where the other driver is uninsured, or you are involved in a hit and run and the at-fault driver is unknown, your insurer steps into the shoes of the uninsured or unidentified driver and the amount recoverable is limited to $200,000. Further, an injured party cannot claim against his or her own insurer if the person is entitled to recover money under the third-party liability of any other motor vehicle liability policy.
Section 265 coverage compensates victims of motor vehicle accidents for their injuries by uninsured or unidentified drivers and is different and apart from underinsured claims for inadequately insured drivers.
III. Underinsured claims: What happens if the at-fault driver does not have enough insurance coverage to compensate for my injuries?
In Ontario, it is possible to purchase optional insurance coverage known as OPCF 44R. This optional coverage provides compensation from your own insurer, and protects you or an eligible member of your family, to the same limits as your third-party liability coverage if you are involved in an automobile accident where you are not at-fault with someone who carries less insurance, no insurance, or is an unidentified driver.
In circumstances where the defendant driver’s policy has insufficient limits to fully compensate the injured person for their damages, and the injured party’s OCPF 44R coverage is greater than the at-fault person’s liability limits, then that coverage will pay the difference. For example, if you have purchased a policy with $2,000,000 liability and OPFC 44R limits and the at-fault driver has $1,000,000 available to compensate the injured party, the at-fault motorist’s insurer will pay the first $1,000,000 of the claim and your insurer would cover whatever is left over, up to a maximum of $$1,000,000. If both you and the at-fault driver have the same limits of $1,000,000, then you would not have any additional underinsured coverage. In most cases, the cost of increasing coverage from $1,000,000 to $2,000,000 is a very small amount when compared to the total cost of your car insurance.
The OPCF 44R provides coverage to any “eligible claimant”. For OPCF 44R coverage, an “eligible claimant” is defined as an “insured person” or the spouse and/or dependant relative2 of the named insured. It is important to note that only individuals that meet the above criteria will qualify as eligible claimants. Therefore, friends, or a boyfriend or girlfriend will not qualify for OPCF 44R coverage.
It is important that you speak with a personal injury lawyer after you have been involved in an accident. In most cases, an injured person must bring an action against an at-fault driver within 2 years from the date of the accident.3 For an OPCF 44R claim, the time limit is just 12 months from the date the claimant knew or ought to have known that the amount of the claim exceeds the underinsured third-party liability coverage.4
2 Section 1.2 of OPCF 44R states:
1.2 “dependent relative” means
( a ) a person who is principally dependent for financial support upon the named insured or his or her spouse, and who is
(i) under the age of 18 years;
( ii ) 18 years or over and is mentally or physically incapacitated;
( iii ) 18 years or over and in full time attendance at a school, college or university;
( b ) a relative of the named insured or of his or her spouse, who is principally dependent on the named insured or his or her spouse for financial support;
( c ) a relative of the named insured or of his or her spouse, who resides in the same dwelling premises as the named insured; and
(d) a relative of the named insured or of his or her spouse, while an occupant of the described automobile, a newly acquired automobile, or a temporary substitute automobile, as defined in the Policy.
BUT subsections 1.2(c) and 1.2(d) apply only where the person injured or killed is not an insured person as defined in the family protection coverage of any other policy of insurance or does not own, or lease for more than 30 days, an automobile which is licensed in any jurisdiction of Canada where family protection coverage is available.
3 See, Section 4 of the Limitations Act, 2002.
4 See, Section 17 of OPCF 44R, http://www.fsco.gov.on.ca/en/auto/forms/Documents/OAP-1-Application-and-Endorsement-Forms/1076E.pdf