No-Fault Insurance
If you’re one of millions of Canadians who live in provinces with “no-fault” insurance, you’ve probably had ample opportunity to wonder who came up with such a dumb name. It’s an oxymoron I’d wager has caused more confusion than all the rest of insurance terminology combined.
The name DOES NOT mean no one is held responsible, or at fault, in a collision. If you hit the bumper of a car in front of you, having no-fault insurance most emphatically does not mean you can breathe a sigh of relief. If you caused the collision, or were even partly responsible, you can and will still be held responsible, both by your insurer and the law.
It DOES mean that if the collision wasn’t your fault that, you, personally, don’t have to pursue the other driver and his or her insurer for compensation. But there’s no such thing as a collision where no one is at fault. Whenever two vehicles collide, insurers *always* assign fault.
Indeed, sometimes both (or several) drivers are deemed at fault, in which case insurers use fault determination rules to assign the percentage of fault to assign proportionately to each driver involved. You can be anywhere from 100 percent to 0 percent at fault, but even a determination of you being 5 percent at fault will put the incident on your insurance record as an “at fault’ collision.
Liability remains
And even if police don’t file charges, insurance companies will assign liability. For example, you may be driving the legal speed limit and maintaining two car lengths between you and the car in front of you when a squirrel runs out in front of the car in front of you and the driver suddenly brakes. You may be on ice and discover you can’t stop in time to avoid the vehicle in front of you. In such a case, police may say neither of you was at fault. Yet insurance companies would apply a rule that states any vehicle rear-ending another vehicle is at fault.
If your insurer deems the collision is your fault, even if police said the collision was no one’s fault, you’d better believe your insurer will still hold you responsible. Your policy will pay out whatever compensation you signed up for, including vehicle replacement if that’s what your policy paid for, but you won’t get a free pass on liability. If a collision is deemed your fault, you will pay more to insure your car when it comes time to renew your policy.
In addition, if the collision was your second at-fault collision in the last five years, you may pay a LOT more. Your insurer could even cancel your policy. That can pretty much make you uninsurable with any but the highest-risk insurers and you’ll need deep pockets to pay for whatever insurance you’re able to get.
That’s something to think about when loaning your car to a friend or family member. When you loan someone your car, you’re also loaning them your insurance. If they are involved in a collision and are deemed at fault, it’s your insurance record and policy at risk.
The difference
The difference between traditional insurance and no-fault insurance is that, under no-fault, blame doesn’t have to be assigned in order to get the insurance ball rolling. Before the advent of no-fault insurance, anyone involved in a collision had to pursue the company who insured the other party in order to get compensation, even to cover treatment for injuries caused in the crash. Under no fault insurance, you deal with your insurance company and the other driver deals with his or her insurance company to receive compensation. If there’s a disagreement between the insurers over who was at fault, they sort it out, not you.
The benefits
This is the good thing about no-fault insurance. If you (or the other driver) require treatment, you can get compensation for your treatment right away, instead of having to wait for a court to hear the evidence and make a ruling on liability. In the event the insurers can’t agree on who’s at fault, you may be called as a witness, but you, personally, don’t have to hire a lawyer in order to be compensated.
Many provincial health plans don’t cover all types of therapy; particularly massage therapy, which can speed your path to physical recovery in the event of soft-tissue damage. Before no-fault insurance, everyone had to pay up front for anything not covered under their provincial health plan, and it could take months, or sometimes years, before a case wound it’s way through court and compensation was paid.
With no-fault insurance, if your doctor deems you need medical treatment not covered under your province’s health plan, your insurer will give you forms to fill out in order to be compensated right away for any treatment you’ve paid for.
The disadvantage
Insurers cite a decrease in litigation costs as a result of the adoption of no-fault insurance. Since insurers raise the premium for anyone deemed at fault, they recoup the cost of paying out a settlement while avoiding the expense of going to court, in most cases.
Critics say this doesn’t sufficiently punish bad driving and fails to provide a deterrent to careless drivers. They point out that it tends to result in higher premiums across the board, even for drivers with perfect driving records. Particularly in urban centres, under no-fault insurance we all end up paying for careless drivers’ mistakes through higher premiums.
When you don’t agree with an insurer
If you don’t agree with how your insurer determined fault, find out whether your insurer has an ombudsman or someone who deals with customer complaints. If the ombudsman can’t resolve the matter to your satisfaction, you can always hire a lawyer and take your insurer to court. But good luck with that one, unless your pockets are deeper than your insurer’s.
If you’re one of millions of Canadians who live in provinces with “no-fault” insurance, you’ve probably had ample opportunity to wonder who came up with such a dumb name. It’s an oxymoron I’d wager has caused more confusion than all the rest of insurance terminology combined.
The name DOES NOT mean no one is held responsible, or at fault, in a collision. If you hit the bumper of a car in front of you, having no-fault insurance most emphatically does not mean you can breathe a sigh of relief. If you caused the collision, or were even partly responsible, you can and will still be held responsible, both by your insurer and the law.
It DOES mean that if the collision wasn’t your fault that, you, personally, don’t have to pursue the other driver and his or her insurer for compensation. But there’s no such thing as a collision where no one is at fault. Whenever two vehicles collide, insurers *always* assign fault.
Indeed, sometimes both (or several) drivers are deemed at fault, in which case insurers use fault determination rules to assign the percentage of fault to assign proportionately to each driver involved. You can be anywhere from 100 percent to 0 percent at fault, but even a determination of you being 5 percent at fault will put the incident on your insurance record as an “at fault’ collision.
Liability remains
And even if police don’t file charges, insurance companies will assign liability. For example, you may be driving the legal speed limit and maintaining two car lengths between you and the car in front of you when a squirrel runs out in front of the car in front of you and the driver suddenly brakes. You may be on ice and discover you can’t stop in time to avoid the vehicle in front of you. In such a case, police may say neither of you was at fault. Yet insurance companies would apply a rule that states any vehicle rear-ending another vehicle is at fault.
If your insurer deems the collision is your fault, even if police said the collision was no one’s fault, you’d better believe your insurer will still hold you responsible. Your policy will pay out whatever compensation you signed up for, including vehicle replacement if that’s what your policy paid for, but you won’t get a free pass on liability. If a collision is deemed your fault, you will pay more to insure your car when it comes time to renew your policy.
In addition, if the collision was your second at-fault collision in the last five years, you may pay a LOT more. Your insurer could even cancel your policy. That can pretty much make you uninsurable with any but the highest-risk insurers and you’ll need deep pockets to pay for whatever insurance you’re able to get.
That’s something to think about when loaning your car to a friend or family member. When you loan someone your car, you’re also loaning them your insurance. If they are involved in a collision and are deemed at fault, it’s your insurance record and policy at risk.
The difference
The difference between traditional insurance and no-fault insurance is that, under no-fault, blame doesn’t have to be assigned in order to get the insurance ball rolling. Before the advent of no-fault insurance, anyone involved in a collision had to pursue the company who insured the other party in order to get compensation, even to cover treatment for injuries caused in the crash. Under no fault insurance, you deal with your insurance company and the other driver deals with his or her insurance company to receive compensation. If there’s a disagreement between the insurers over who was at fault, they sort it out, not you.
The benefits
This is the good thing about no-fault insurance. If you (or the other driver) require treatment, you can get compensation for your treatment right away, instead of having to wait for a court to hear the evidence and make a ruling on liability. In the event the insurers can’t agree on who’s at fault, you may be called as a witness, but you, personally, don’t have to hire a lawyer in order to be compensated.
Many provincial health plans don’t cover all types of therapy; particularly massage therapy, which can speed your path to physical recovery in the event of soft-tissue damage. Before no-fault insurance, everyone had to pay up front for anything not covered under their provincial health plan, and it could take months, or sometimes years, before a case wound it’s way through court and compensation was paid.
With no-fault insurance, if your doctor deems you need medical treatment not covered under your province’s health plan, your insurer will give you forms to fill out in order to be compensated right away for any treatment you’ve paid for.
The disadvantage
Insurers cite a decrease in litigation costs as a result of the adoption of no-fault insurance. Since insurers raise the premium for anyone deemed at fault, they recoup the cost of paying out a settlement while avoiding the expense of going to court, in most cases.
Critics say this doesn’t sufficiently punish bad driving and fails to provide a deterrent to careless drivers. They point out that it tends to result in higher premiums across the board, even for drivers with perfect driving records. Particularly in urban centres, under no-fault insurance we all end up paying for careless drivers’ mistakes through higher premiums.
When you don’t agree with an insurer
If you don’t agree with how your insurer determined fault, find out whether your insurer has an ombudsman or someone who deals with customer complaints. If the ombudsman can’t resolve the matter to your satisfaction, you can always hire a lawyer and take your insurer to court. But good luck with that one, unless your pockets are deeper than your insurer’s.