Understanding Automobile Insurance in Ontario – Part II
Insurance policies in Ontario are called Standard Auto Insurance Policies because they are substantially standard in form and content. With the exception of some special cases, the Insurance Act prohibits insurers from using or issuing a policy, endorsement or renewal that has not been approved by the government (more specifically by the Superintendent of Financial Services). In accordance with the Insurance Act, all contracts of motor vehicle insurance in Ontario, issued after January 1, 1994, include Statutory Conditions, as outlined in Ontario Regulation 777/93 and no omission or addition from those statutory conditions are binding on the insured (except special cases).
Statutory conditions include a whole bunch of rules that apply to the contract. Some of those rules are for the benefit of the insurer and others are for the benefit of the insured. For example, it is in accordance with statutory condition 3 that motorists in Ontario can pay their premiums on a monthly basis.
Breach of a of statutory conditions has no effect on the insured’s right to receive statutory accident benefits.
Components of Standard Auto Insurance Policy
Mandatory insurance coverage in Ontario is composed of four categories. These coverage categories are Liability, Accident benefits, Uninsured Automobile, and Direct Compensation. In the following paragraphs we briefly discuss the law regarding each of these coverage.
Liability covers the insured against the claim of a third-party for personal injury or property damage, up-to the limit stated in the policy. Liability coverage forces the insurer to take over the defence of a claim/lawsuit against you, hire a lawyer, and defend it. In particular, the insurer has a duty to “investigate”, “negotiate”, “defend”, and “settle”. It is also responsible for any costs assessed against the insured who may have been at fault for the accident. In accordance with the Insurance Act, your insurance policy not only provides the owner-insured with liability coverage, but also any other person who with the owner-insured’s consent drives the vehicle, or any occupant of the vehicle. The excluded-driver exception obviously applies such that any person who is named in the contract as an excluded driver is not entitled to liability coverage.
Liability coverage is limited to losses or damages arising directly or indirectly from the use or operation of the automobile owned by the insured, so far as that use or operation occur within a specified geographic limit, namely within Canada, United States, and upon “a vessel plying between ports of Canada” and the United States of America. This geographical scope applies to all components of coverage discussed in this article.
In Ontario the minimum amount of liability that insurance contracts must provide for is $200,000, with respect to any one accident. However, most of the insurance contracts provide liability coverage of $1,000,000 or more.
If the accident occurs anywhere in Canada other than Ontario, or in the United States, the insurer is liable up to the minimum limits prescribed for that jurisdiction.
In circumstances where liability arises from the use or operation of a leased or rental vehicle the following rules apply in determining which insurer is liable to pay for personal injury claims of an injured party:
- First the insurance policy of the lessee or renter;
- Any claims in excess of lessee or renter’s coverage will be the responsibility of the insurer of the driver of the leased or rented automobile (obviously if the renter/lessee is not the same person as the driver);
- Any claim in excess of coverage provided by the above two insurance policies will be the responsibility of the insurer that insured the owner (rental company or leasing company) of the automobile.
In the circumstance where insurance is available under more than one motor vehicle liability policies above, each insurer will have to pay its rateable proportion of liability, expense, loss, or damage, which means that (a) if there are two insurers available and each has the same policy limits, they will share equally (b) if there are two insurers and they have different limits, then insurers will share equally up to the limit of the smaller policy limits and (c) if there are more than two insurers available then they will share in accordance with (a) and (b) above.
 See s.227(2) of Insurance Act.