ONTARIO AUTOMOBILE CLAIMS PRIMER
Rogers Partners LLP
1. INTRODUCTION
When a car accident occurs in Ontario, an injured person may pursue two separate
avenues of recovery:
• A tort action may be commenced against the at fault driver, seeking recovery of
damages; and
• An application for accident benefits may be submitted to the injured person’s
insurer, seeking payment of various accident benefits.
As a result of the undertakings signed by most U.S. insurers, for Ontario accidents the
third party liability limits of the U.S. insurer’s policy are automatically increased to
$200,000(CDN). In addition, the U.S. insurer will potentially have liability over and
above the $200,000 limits for the plaintiff’s legal costs and disbursements. Furthermore,
U.S. insureds are entitled to accident benefits at the levels set out by the Ontario
Statutory Accident Benefits Schedule (SABs).
Accidents Occurring on or after October 1, 2003
There were significant changes in the Ontario legislation pertaining to motor vehicle
accidents in 2003. This paper deals with the law as it applies to motor vehicle accidents
in Ontario occurring on or after October 1, 2003.
2. TORT CLAIMS
Non-pecuniary general damages:
Based on the provisions of the Ontario Insurance Act, claims for non-pecuniary general
damages are subject to a verbal threshold and monetary deductible. The threshold for
recovery of non-pecuniary damages is defined in section 267.1 of the Ontario Insurance
Act as:
(a) permanent serious disfigurement; or
(b) permanent serious impairment of an important physical, mental or
psychological function.
The serious and permanent threshold is further defined by regulation which also sets
out evidence that must be adduced to prove entitlement. “Serious” requires:
“substantial interference with ability to continue with regular or usual employment
despite reasonable accommodation…; or substantial interference with most of the usual
activities of daily living considering the person’s age”. “Permanent” is of a nature that
is expected to continue without substantial improvement when sustained by persons in
similar circumstances.
In Canada, there is a cap on non-pecuniary general damages. As of 2017, that amount is
set at $368,946.
Pre-Judgment interest is calculated on general damages at 5% per annum. The
Insurance Act was recently amended, resulting in a change in the calculation of pre-
judgment interest on non-pecuniary damages from 5%, to a rate consistent with a rate
set by the Courts of Justice Act, which will vary with inflation. Currently, for accidents
occurring in the first quarter of 2017, the pre-judgment interest rate is 0.8%.
FLA Claims
In addition to claims by injured persons, dependant relatives of persons injured or
killed in accidents are entitled to claim for pecuniary losses and damages resulting from
a loss of care, guidance and companionship of the injured or deceased persons. Family
Law Act claims are reduced for contributory negligence attributable to the injured or
deceased person.
Section 61 of the Family Law Act sets out the rights of dependants to sue in tort. It states
in part:
If a person is injured or killed by the fault or neglect of another under
circumstances where the person is entitled to recover damages, or would
have been entitled if not killed, the spouse, as defined in Part III (Support
Obligations), children, grandchildren, parents, grandparents, brothers and
sisters of the person are entitled to recover their pecuniary loss resulting
from the injury or death from the person from whom the person injured
or killed is entitled to recover or would have been entitled if not killed,
and to maintain an action for the purpose in a court of competent
jurisdiction.
The damages recoverable by FLA claimants include:
(a) actual expenses;
(b) actual funeral expenses;
(c) travel expenses in visiting the person during his or her treatment or recovery;
(d) loss of income or the value of the nursing, housekeeping or other services
provided for the person; and
(e) compensation for the loss of guidance, care and companionship that the
claimant might reasonably have expected to receive from the person if the injury
or death had not occurred.
In certain dependency circumstances, FLA claimants may also be entitled to claim loss
of financial support which would have been received from the injured or deceased
person. FLA claimants may also be able to claim for their own income losses suffered
because of the grief or upset sustained as a result of the death or serious injury of the
main plaintiff (or estate).
Non-Pecuniary Damages - Statutory Deductible:
The statutory deductible applies only to non-pecuniary losses and is to be applied to the
award of damages before any split in liability.
An injured plaintiff’s award is to be reduced by statutory deductible. As of 2017, the
deductible for an injured plaintiff is $37,385.17, and applies to all non-pecuniary
damages awards of less than $124,616.21. This amount is indexed to inflation, and is
updated annually.
Each Family Law Act plaintiff’s award is to be reduced by a statutory deductible of
$18,692.59 on all awards of less than $62,307.59 (also indexed to inflation).
There is no deductible for wrongful death claims, where the accident occurred after
August 31, 2010.
Pecuniary Losses
Health care claims are permitted, but only if the plaintiff’s injuries meet the serious and
permanent threshold. This can be a significant source of exposure in serious injury
cases, where the actual health care costs exceed available funding through collateral
benefits (including SABS or private health care plans).
Claims for housekeeping and home maintenance/handyman expenses are common.
Various other claims for special damages are permitted subject to remoteness.
Neither the threshold nor the deductible applies to other pecuniary loss claims.
There can be no claim for income losses suffered in first seven days after the accident.
Claims for pre-trial income loss are restricted to 70% of gross income loss, for accidents
that took place on or after September 1, 2010. Claims for post-trial income loss are
assessed at 100% of gross income loss.
OHIP Subrogated Claims
In situations where the automobile liability policy is not written in Ontario, there may
be further exposure to subrogated claims brought on behalf of Ontario Health Insurance
Plan (OHIP) for health care expenses incurred in connection with the treatment of the
injured person. Releases signed by plaintiffs do not bind OHIP in regards to potential
subrogation, unless OHIP is aware of and agrees to the settlement reached.
Collateral Benefits
Collateral benefits are statutorily required to be deducted from economic losses in the
context of a tort award, but are not to be deducted from non-pecuniary damage awards.
For income losses, based on the Insurance Act provisions, the plaintiff’s damages are
reduced by: all SABS received or available for income loss or loss of earning capacity up
to date of trial; all payments received or available under a legislated income
continuation plan or an income continuation benefit plan up to the date of trial (e.g.
CPP Disability); and all payments received under a sick leave plan up to the date of
trial.
Similar statutory provisions require that health care expenses and other economic loss
claim awards be reduced by collateral benefits received or available up to the date of
trial. A benefit is deemed not available if the plaintiff has made an application for the
benefit in good faith, and the benefit has been denied.
However, after a trial, plaintiffs are entitled to recover future pecuniary losses from the
tortfeasor without regard to future collateral benefits. Future benefits will be subject to
a statutorily codified Cox v. Carter Order which requires the plaintiff to hold all future
benefits received from collateral payors in trust for the tortfeasor. Alternatively, a court
may order that the plaintiff assign future rights to collateral benefits over to the
tortfeasor and to co-operate with the tortfeasor in the future collection of benefits from
collateral payors.
Direct Compensation Property Damage
Section 263 of the Ontario Insurance Act, in essence provides that, in the event of a
collision between two insured vehicles, each vehicle’s insurer pays its own insured the
property damage that would ordinarily be the obligation of the other party’s insurer.
As an example, if a U.S. vehicle were to collide with a vehicle, “X”, insured by another
insurer, and X was 75% at fault for the accident, the U.S. insurer would pay its insured
75% of the insured’s property damage claim under the Direct Compensation Property
Damage coverage.
If the U.S. insurer’s insured carried collision coverage, the U.S. insurer would pay the
remaining 25% under the collision coverage. Fault is determined by a Fault Chart in
R.R.O. 1990, Reg. 668. These rules can be found at: http://www.e-
laws.gov.on.ca/html/regs/english/elaws_regs_900668_e.htm
3. ACCIDENT BENEFIT CLAIMS
An insured person may claim SABS from his/her own personal insurer, employer’s
insurer, insurer of vehicle in which he/she is an occupant at the time of the accident, or
insurer of other vehicles involved in the accident. Numerous different types of SABS
benefits are available as part of the standard Ontario automobile policy depending on
nature and severity of the claimants injuries.
There is, generally speaking, no ability for an insurer to subrogate to recover SABS
payments made to its insureds. There are certain exceptions in claims involving certain
classes of automobiles, including heavy commercial vehicles and motorcycles (referred
to as “loss transfer” claims).
In addition to changing the rate for pre-judgment interest on non-pecuniary damages,
Bill 15 also implements a change of the dispute resolution process for accident benefits
claims. Previously, a claimant could apply to the Financial Services Commission of
Ontario (“FSCO”) for mediation. Bill 15 replaces FSCO mediation with a body called
the Licence Appeal Tribunal (“LAT”). These new procedural provisions for resolution
of statutory accident benefits disputes by the LAT have not yet been implemented.
Weekly Benefits
Income Replacement Benefits: compensate for lost income if claimant suffers a substantial
inability to perform the essential tasks of his/her pre-accident job. Income replacement
benefits are payable beyond two years after the accident if the claimant suffers a
complete inability to engage in any employment for which he/she is reasonably suited
by education, training or experience.
The benefit is calculated at 70% of gross income before the accident up to a maximum
weekly benefit of $400 (for accidents that took place after September 1, 2010).
Non-Earner Benefits: compensate if the claimant is completely unable to carry on a
normal life, and does not qualify for an Income Replacement Benefit or Caregiver
Benefit. The benefit is $185 per week beginning 26 weeks after complete inability arose.
Caregiver Benefits: compensate the claimant for expenses incurred if he/she cannot
continue as the main caregiver for a person (such as child under age 16) who needs care.
The benefit pays expenses up to $250 per week for the first person in need of care, plus
$50 for each additional person.
For accidents occurring after September 1, 2010, caregiver benefits are only available for
claimants deemed to be catastrophically impaired.
Health Care Benefits
Medical Benefit: pays for reasonable and necessary medical expenses incurred as a result
of claimant’s injuries, which are not covered by any other medical plan, such as the
Ontario Health Plan, or any medical plans at the workplace.
Rehabilitation Benefit: pays for reasonable and necessary rehabilitation expenses incurred
as a result of claimant’s injuries. These are expenses that are not covered by any other
plan.
Attendant Care Benefit: compensates for the expense of an aide or attendant or services
provided by a long-term care facility at prescribed rates.
The maximum amount available for non-catastrophically impaired claimants for
medical and rehabilitation expenses is $50,000, with a 10 year time limit, and $36,000 for
attendant care benefits with a two year time limit. However, if the claimant is
catastrophically impaired, the maximum amount is $1,000,000 for medical and
rehabilitation expenses, and $1,000,000 for attendant care expenses, with no time limits.
Other Expenses: there is also coverage available for expenses of family members incurred
when visiting you during treatment or recovery; housekeeping and home maintenance,
payable at a maximum of $100 per week, repair or replacement of items lost or
damaged in the accident such as clothing, prescription eyewear, dentures, hearing aids,
prostheses and medical or dental devices; lost educational expenses; and the reasonable
cost of examinations obtained for the purposes of the Statutory Accident Benefits Schedule.
For accidents occurring after September 1, 2010, this benefit is only available for
claimants deemed to be catastrophically impaired.
Death and Funeral Benefits: are available to pay family members of a person killed in an
automobile accident ($25,000 is paid to a surviving spouse, $10,000 to each surviving
dependant, and a total of $10,000 to a person on whom the deceased was a dependant)
and up to $6,000 to cover funeral expenses.
Optional Benefits: are available for purchase from Ontario insurers, which increase the
limit of many of the benefits above.
As set out above, if the claimant meets the definition of “catastrophic impairment”,
he/she is entitled to significantly increased accident benefits (monetary and temporal
limits). “Catastrophic impairment” includes: paraplegia or quadriplegia, amputation
or other impairment causing total and permanent loss of use of both arms or total and
permanent loss of both an arm and leg or both legs, total loss of vision, certain brain
injuries, and certain other combinations of impairments that result in 55% or more
impairment of the whole person. This determination must be made by medical experts.
Accident Benefits Procedures
The SABs provides for a rather intricate procedural system for claiming and responding
to claims for accident benefits, including numerous forms (OCFs) created by FSCO. The
system involves rather strict timelines for responses to various forms submitted to
insurers and involves the determination of entitlement based on the severity of the
initial injury, followed by ongoing assessments. If treatment modalities or benefits
being sought are not approved, entitlement may be determined by way of medical
examinations and insurer’s assessments.
Various SABS sections require compliance by the insured with requests for information
and documentation. Non-compliance (without a reasonable explanation) can result in
suspension and/or forfeiture of benefits. Insurers are permitted to terminate IRBs,
Non-Earner Benefits and Caregiver Benefits if insured fails to participate in treatment or
seek reasonable employment. In addition to medical examinations, insurers may
conduct an Examination under Oath of the claimant (with limitations).
Accident Benefits Litigation
Once Bill 15 is fully implemented and the Licence Appeals Tribunal becomes the
governing body for dispute resolution, claimants will no longer have the option of
commencing a court action for adjudication of accident benefits issues.
A court action for accident benefits is governed by the same Rules of Civil Procedure as a
tort action.
Actions and arbitration proceedings claim specified benefits and declarations for
entitlement to ongoing benefits. An insured cannot sue to compel a lump sum
settlement, but an insurer may elect to fully and finally resolve a claim.
There can be no lump sum settlements until one year after accident, unless there have
already been examinations for discovery in a court action, there is a private arbitration
agreement in place, or a FSCO pre-arbitration discussion has occurred. There are strict
requirements with which insurers must comply regarding disclosure and settlement
documentation when a claim is fully and finally settled.
Accident Benefits Claims Handling
Due to the overly technical nature of Ontario SABs claims handling and the onerous
timing restrictions, we highly recommend that an insurer retain a qualified adjuster to
administer its first party accident benefits claims
4. PRIORITY AND LOSS TRANSFER DISPUTES
Disputes between insurers regarding payment of accident benefits may arise in two
different contexts and result in two distinct categories of disputes which must be
resolved by way of private arbitration under the Arbitrations Act, 1991 (which are
distinct from FSCO arbitrations)
Priority Disputes arise in situations where an insurer disputes its obligation to pay
accident benefits to a claimant and alleges that there is another insurer which stands in
higher priority to pay those benefits.
Loss Transfer is a mechanism to re-allocate the burden of paying accident benefits in the
context of accidents involving those vehicles which cause heavy losses (heavy
commercial vehicles) and the most vulnerable vehicles (motorcycles).
The parties generally sign an Arbitration Agreement appointing a private arbitrator and
outlining certain rules which governs the dispute, failing which they are governed by
the default provisions in the Insurance Act and the Arbitrations Act, 1991. Recourse to
the courts for Priority and Loss Transfer Disputes is only with respect to “initiating” an
Arbitration in order to force the appointment of an arbitrator and force the respondent
to submit to arbitration or with respect to appeals from private arbitrators’ awards.
Priority Disputes
Priority disputes are disputes between insurers regarding the responsibility to pay
accident benefits to a claimant. The dispute mechanism is set out in Regulation 283/95
of the Insurance Act. This mechanism provides an insurer with the ability to
permanently transfer an accident benefits claimant to another insurer
The priority scheme detailing which insurer bears the responsibility to pay is set out in
section 268 of the Insurance Act. Simply put, the hierarchy of priority for payment of
accident benefits is as follows:
1. The insurer of an automobile in respect of which the claimant is a named
insured or a spouse or dependant of a named insured
2. The insurer of an automobile in respect of which the claimant is an occupant
3. The insurer of an automobile involved in the incident from which entitlement
to benefits arose
This hierarchy is complicated by certain definitions in the SABS and certain provisions
in the SABS which can deem an individual to be a named insured in situations where a
company vehicle is made available for his/her regular use or where there is a long-term
rental. Specific priority issues arise in situations involving “dependency”, “marital
status”, “occupancy”, “regular use provided by a corporation”, etc.
Early and thorough investigation of priority issues is essential.
The first insurer to receive a completed application for accident benefits must begin
paying benefits pursuant to the SABS subject to a priority dispute. Within 90 days of
receiving a completed application for accident benefits, an insurer must put all other
potential insurers on notice of a priority dispute. The 90 day notice period may be
extended only in certain narrow circumstances and if not satisfied is fatal to the dispute.
Within one year of the first notice of priority dispute, a private arbitration proceeding
must be initiated.
Loss Transfer Disputes
Loss transfer disputes are a different type of dispute between insurers. The loss transfer
mechanism provides an insurer with the ability to seek indemnity for benefits paid and
expenses incurred in connection with an accident benefits claim, but the accident
benefits claim will continue to be administered by the same insurer.
The loss transfer mechanism is set out in section 275 of the Insurance Act and
Regulations 664 and 668. The insurer seeking the loss transfer is the “first party
insurer” and the insurer against whom the claim is brought is the “second party
insurer.” Loss transfer is generally available:
to the insurer of a motorcycle from the insurer of any other class of
automobile; and
to the insurer of any other class of automobile from the insurer of a heavy
commercial vehicle.
The rationale is that under a no-fault system, a shifting of the burden is required when
greater loss causing and more vulnerable vehicles are involved in an accident.
It has been held by the Ontario Court of Appeal that, where a foreign insurer is a
signatory of the Power of Attorney Undertaking, it is entitled to bring a loss transfer
claim with respect to an accident in Ontario.
“Heavy commercial vehicle” is defined in section 9(1) of Regulation 664 as: a
commercial vehicle with gross vehicle weight greater than 4,500 kg or approximately
10,000 lbs. According to the Insurance Act a “commercial vehicle” is an automobile used
primarily to transport materials, goods, tools or equipment in connection with the
insured's occupation.
Loss transfer indemnification is made according to the respective degree of fault of each
insurer's insured. In an attempt to achieve expediency over exactitude, fault for the
purpose of loss transfer is determined under the Fault Determination Rules in
Regulation 668 (either 0%, 50% or 100%). If the accident is not described in any of the
rules or there is insufficient information about the accident, fault is determined
according to the “ordinary rules of law”. Indemnity is paid only to the extent that the
second party insurer’s insured was at fault for the accident
Section 275(2) provides the first party insurer with a right of indemnification “in
relation to such benefits paid by it.” In the loss transfer context, administrative
expenses such as adjusting fees, investigations, costs of insurer’s examinations and
other “loss control measures” are not recoverable from the second party insurer. Section
275(3) stipulates that there is no indemnity available in respect of the first $2,000.00 of
accident benefits paid (the deductible).
The second party insurer may also challenge the reasonableness of the payments made
by the first party insurer, including whether the insured was reasonably entitled to
payment of the benefits delivered by the first-party insurer. Generally, however, a
second party insurer must prove gross negligence on the part of the first party insurer,
in order to be successful on such a challenge. There is arguably no indemnity payable
for overpayments of benefits and interest paid on overdue benefits.
It has been held that a lump sum settlement of the insured’s past, present and future
accident benefits constitutes the “payment of statutory accident benefits” and is,
therefore, subject to loss transfer.
The Ontario Court of Appeal has held that the limitation period for loss transfer claims
only arises once the first party insurer puts the second party insurer on notice of a
claim, and the second party insurer refuses this demand for reimbursement, which is
deemed to be refused one day after the demand.
Accordingly, the limitation period expires 2 years plus 1 day following the demand for
loss transfer reimbursement. Please see: Markel Insurance Company of Canada v. ING
Insurance Company of Canada, 2012 ONCA 2018.
