Canadian Underwriter

A car crashes in Ontario: Why Canadian auto insurers pay attention

April 13, 2022   by Daniel Strigberger

Auto accident damage at intersection.

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People love to visit Ontario. Unfortunately, some of them get into car accidents.

Why should a visitor’s auto insurer care about accidents in Ontario? Because when a non-resident is involved in an auto accident in the province, their insurers will likely have to pay Ontario accident benefits – even if their policies don’t contain any coverage for accident benefits.

Their insurers might also need to participate in priority dispute arbitrations in Ontario, due to a binding, interprovincial and international reciprocal scheme.

First, most American and many Canadian auto insurers have filed a Power of Attorney and Undertaking (PAU) in Canada’s provinces and territories. One of the undertakings in the PAU requires an out-of-province insurer to appear in a proceeding where the accident occurred.

It also prevents that insurer from raising a defence under their policy that would be unavailable under a policy issued in the jurisdiction where the accident occurred. So, if the accident happened in Ontario, an out-of-province insurer couldn’t argue their policies did not contain Ontario coverages.

Every auto policy in Ontario is deemed to provide statutory accident benefits to insured persons, broadly defined to include the named insured, their spouse, any dependants, anyone with regular use of a company car, and anyone specified in the policy as a driver of the insured automobile.

Coverage is also extended to any occupant of the insured vehicle at the time of an accident, anyone struck by the insured automobile, or anyone injured in an accident involving the insured auto.

Basically, anyone involved in a car accident in Ontario is entitled to accident benefits.

If the accident involves only an uninsured or unidentified vehicle, an Ontario resident is entitled to receive accident benefits from a government-administered fund called the Motor Vehicle Accident Claims Fund. Non-residents can access that fund if their home jurisdictions have a similar program.

Ontario’s Insurance Act creates a pecking order for deciding which insurer is responsible for paying accident benefits:

  1. The claimant first has recourse against their own insurer.
  2. If they don’t have one, it next has recourse against the insurer of the automobile they were in, or which struck them.
  3. If that vehicle is uninsured, the claimant next has recourse against the insurer of any other vehicle involved in the accident.
  4. If there weren’t any, it has recourse against the Motor Vehicle Accident Claims Fund.

Accident benefits priority disputes are governed by the Disputes Between Insurers regulation under the Insurance Act. The pay-first, dispute-later scheme makes sure benefits payments to injured claimants aren’t delayed if there’s a priority dispute between two or more insurers.

If a claimant applies to the wrong insurer for accident benefits, the legislation requires the insurer accept the application and pay as entitled. That insurer can then dispute priority with another insurer.

Insurers that refuse an application, or deflect it to another insurer, could face sanctions in the ensuing arbitration process or be penalized by the Financial Services Regulatory Authority of Ontario.

An insurer disputing priority must meet strict timelines:

  • Within 90 days after receiving a completed accident benefits application, it must give the other insurer written notice of its intention to dispute priority.
  • Within a year after giving its notice of dispute, it must initiate private arbitration proceedings against the other insurer if it still wants to dispute priority.

An insurer that misses the 90-day limit would have to convince the arbitrator that 90 days was insufficient to determine priority and that it conducted reasonable investigations on priority during those 90 days.

Daniel Strigberger is a partner at Strigberger, Brown, Armstrong in Waterloo, Ont. This article is excerpted from one that appeared in the April issue of Canadian Underwriter.

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