If you own a vehicle, you probably pay for insurance on it. But you may not know what you are actually paying for and why governments require it.
This article briefly describes why governments require vehicle insurance. It then gives an overview of the insurance systems for mandatory insurance in Alberta, British Columbia, and Saskatchewan. In all these jurisdictions, people can buy additional insurance products (such as collision, comprehensive, or extended third-party liability coverage) that supplement the mandatory insurance.
Why mandate vehicle insurance?
As vehicles made their way into everyday life, so too did vehicle accidents, which often resulted in injuries or property damage. Tort law already allowed people with injuries or property damage to sue at-fault people for certain damages suffered. However, if the at-fault person could not afford to pay for the damage they caused, the person who suffered damages would not actually be compensated for their losses.
Governments became concerned that people who suffered injury or property damage from an accident may not receive enough compensation. In response to this concern, governments made vehicle insurance mandatory. This insurance shared losses between owners of vehicles and helped make sure people could receive compensation if they were injured or their property damaged.
In most Canadian jurisdictions, there are two basic components to mandatory vehicle insurance:
- third-party liability
- first-party no-fault benefits
Third-party liability is what responds when someone sues you for damages. It is a pool of money that is used to pay for any damages award against you. It involves the insurer stepping in to defend the action on your behalf – hiring lawyers and determining how to run the claim. It provides you with protection from personal liability if there is a claim against you. It also protects the injured person, as it ensures there is money available to cover some or all of their damages.
First-party no-fault benefits are available when you are injured in an accident, even if you are at fault or there is no one to sue for the accident. Where there is someone to sue, these benefits are available more quickly while any litigation resolves. They are generally paid to you by your insurer, usually on an as-needed basis. These benefits provide a basic level of care to cover certain expenses. For example, these benefits may include a wage loss supplement and cover certain medical and rehabilitation expenses. These benefits provide some compensation if there is no one to sue for the accident.
First-party no-fault benefits may be available to you, the person who purchased insurance, or your family members. They may also be available to anyone who is driving or riding in the vehicle, or to those injured by the vehicle. All of this depends on what the law requires and whether the insurer agrees to provide more than the minimum legal requirements.
Since vehicle insurance is provincially regulated, there are different systems in place in each province. The next part of this article describes those found in Alberta, British Columbia, and Saskatchewan.
Alberta has a modified tort system with private insurers. In this system, the primary way to get compensation is to sue the at-fault person for damages suffered as a result of the at-fault person’s negligence. The court determines whether the person was negligent, and the amount of compensation (known as damages) the injured person should get. Most cases do not actually end up in court because the parties reach an agreement before trial.
In Alberta, … damages for pain and suffering for minor injuries are limited to $5,365 (in 2021).Generally, the rules that govern this law are found in earlier court decisions. However, government can set certain rules in legislation or regulations. In Alberta, the government has made some changes to tort law, the primary being that damages for pain and suffering for minor injuries are limited to $5,365 (in 2021).
Vehicle insurance in Alberta is provided by the private market. There is no government insurer that Albertans must purchase their insurance from. But all insurance providers must follow any rules set out by the government.
In Alberta, you must carry $200,000 of third-party liability insurance on your vehicle. The insurer must provide up to $50,000 of first-party no-fault benefits, with benefits available for two years after the accident.
Third party-liability insurance may pay for bodily injury and property damage, including vehicle damage. However, compensation for vehicle damage is scheduled to change on January 1, 2022 from this tort model to one where your insurer provides you with compensation directly to the degree you are not at fault. Stay tuned.
British Columbia has a care-based model of insurance administered by a public insurer. Many people refer to this system as first-party no-fault benefits. But this article uses the term care-based model because the benefits available under this system are usually far greater than the first-party no-fault benefits found in tort models.
Customers must purchase a certain level of insurance from the government insurer, the Insurance Corporation of British Columbia (ICBC). Customers can then purchase additional insurance coverage on the private market.
This model works by the government implementing a lawsuit ban so that people cannot bring a claim in court for damages arising from vehicle accidents. In exchange for banning lawsuits, the law sets out extensive rules around what benefits people are entitled to if they are injured in an accident. Disputes about benefits are resolved by the Civil Resolution Tribunal, instead of a court.
Under this care system, you are entitled to benefits even if you are responsible for the accident. There are certain restrictions on this though. One example is that people convicted of certain Criminal Code offences related to the accident may not receive the full level of benefits. Another example is that people who intentionally cause an accident or who intentionally cause injury may not receive benefits.
This [care-based] model works by the government implementing a lawsuit ban so that people cannot bring a claim in court for damages arising from vehicle accidents.In British Columbia, there is no limit on the total amount of benefits available, although there are limits on some of the different types of benefits. For example, there is a yearly maximum for wage loss benefits, but there is no lifetime maximum for those benefits. Find more information about vehicle injury insurance in British Columbia on ICBC’s website.
Although most lawsuits are banned, basic insurance still includes $200,000 of third-party liability coverage. This third-party liability coverage is important if you cause damage that a person can still sue for or if you drive your vehicle in a jurisdiction where there is no lawsuit ban, such as in Alberta.
Mandatory insurance also includes compensation for vehicle damage when someone else is at fault without you needing to sue that person. ICBC pays this directly to you to the degree you are not at fault. Find more information about vehicle damage insurance in British Columbia on ICBC’s website.
Saskatchewan has a hybrid model of insurance administered by a public insurer. The hybrid model is a mix between a care-based model and a tort model. Customers can choose which model is right for them. If they choose the care-based model, they can still sue for certain additional losses they suffer.
Customers must buy a certain level of insurance from the government insurer, Saskatchewan Government Insurance (SGI). They can then buy additional insurance coverage on the private market.
The mandatory insurance includes a choice between care-based insurance benefits or tort coverage. The default is the care-based model, so if you want tort coverage, you must elect out of the care-based model.
First-party no-fault benefits are available when you are injured in an accident, even if you are at fault or there is no one to sue for the accident.The tort coverage allows you to sue for damages, including pain and suffering. Like in Alberta, the tort coverage option includes a level of no-fault insurance benefits as well. However, these benefits are less than what is available under the care-based model.
Even if you choose the care-based coverage, you can still sue for certain losses that are not covered by your insurance. For example, this coverage compensates for lost income up to a certain level. If you lost more income than is payable under care-based coverage, you may be able to sue to recover the excess. However, you cannot sue for pain and suffering.
If there is a dispute about benefits, customers choose whether to bring their dispute to the Automobile Injury Appeal Commission or the Court of Queen’s Bench. Find more information about vehicle injury insurance in Saskatchewan on SGI’s website.
Vehicle damage is covered by this insurance. If someone else is at fault, their insurance will cover the cost of repairs. If you are at fault for the collision, or there is no one at fault to collect from, your insurance will cover the cost of repairs above your deductible. Find more information on vehicle damage insurance in Saskatchewan on SGI’s website.
If you have been involved in a vehicle accident, you should seek legal advice on your entitlement to compensation.
The information in this article was correct at time of publishing. The law may have changed since then. The views expressed in this article are those of the author and do not necessarily reflect the views of LawNow or the Centre for Public Legal Education Alberta.
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