Chapter 13 Direct Compensation Plans; Ontario New Brunswick and Plans Key Point Questions
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What early agreements applied the concept of no-fault insurance for vehicle damage?
Briefly summarize how "knock-for-knock" agreements operated.
Under knock-for-knock agreements each insurer paid for repairs to its own policyholder's vehicle after a collision, regardless of who was at fault.
If both parties carried physical damage coverage, "knock-for-knock" agreements resulted in cost savings and ease of claims handling for insurers. If each insurer paid its own insured and did not pursue subrogation, money was saved on investigation, fault determination, and costly litigation between insurers.
What were some drawbacks using "knock-for-knock" agreements to settle claims?
With "knock-for-knock" agreements did have some drawbacks. Some insurers did not agree with the philosophy behind them. There were problems with payment of deductibles, and fault still had to be established for premium determination. Further, there was typically a cap on the dollar amount per claim under these agreements.
What are the aims of Direct Compensation?
The aims of direct compensation are the same as the aims of "knock-for-knock" agreements:
1) less investigation
2) less subrogation activity
3) less litigation
4) speedier settlements for insureds
5) insureds only dealing with their own insurer
All of these may lead to the ultimate benefit of
6) cost savings resulting in lower premiums.
What province introduced an automobile insurance plan characterized mainly by no-fault(direct) compensation in 1978?
In 1978, Quebec implemented an automobile insurance plan characterized mainly by no-fault(direct) compensation.
Why must fault still be established when claims are settled under no-fault plans?
Fault is still considered when claims are settled. This is because insureds are indemnified to the extent they are not-at-fault. Fault must also be considered for premium chargeability.
What is the role of the Driver's fault Chart in Quebec and Fault Determination Rules in New Brunswick and Ontario?
To determine fault responsibility for the direct compensation of property damage claims.
Each depicts various possible accident situations and sets out rules for apportioning liability.
Losses are settled according to these rules and charts.
If insurers and insureds are not able to come to an agreement about the fault determination, insureds may take action against their own insurer and let the courts decide the matter.
What are the main coverage sections of the Ontario Owner's Policy(OAP 1)?
Section 1 - Introduction
Section 2 - What Automobiles Are Covered
Section 3 - Liability Coverage
Section 4 - Accident Benefits Coverage
(Details pertaining to this section of the policy are contained in the Statutory Accident Benefits Schedule which is part of the Regulations pursuant to the Insurance Act of Ontario.)
Section 5 - Uninsured Automobile Coverage
(Uninsured automobile coverage is a separate, compulsory coverage, unlike other provinces where it is part of Accident Benefits.)
Section 6 - Direct Compensation - Property Damage Coverage
Section 7 - Loss or Damage Coverages
Section 8 - Statutory Conditions
What coverages are compulsory in Ontario?
- Liability coverage,
- Accident Benefits coverage,
- Uninsured Automobile coverage,
- and Direct Compensation - Property Damage(DCPD) coverage are compulsory coverages.
What coverages are optional in Ontario?
The Loss or Damage coverages are optional.
The insured can choose from a number of coverage options:
- All Perils,
- Specified Perils
What is a verbal threshold?
Verbal Threshold: is the words or language describing an injury that must be suffered in order to be able to sue.
What is Direct Compensation - Property Damage(DCPD)?
Direct Compensation -Property Damage(DCPD): indemnifies insureds for damage to the automobile and its contents and loss of use caused partially or completely by 3rd parties.
Direct Compensation - Property Damage(DCPD) applies if both vehicles are insured under automobile policies issued by insurers licensed in Ontario or that have signed the Direct Compensation undertaking, and damage occurs in Ontario.
If you are an Ontario motorist and your vehicle is damaged by a 3rd party who is 100% at fault, from whom would claim for the damage?
This section does not give rights of recovery that are greater than a 3rd party would have against the wrongdoer if no DCPD coverage existed. In tort systems, the 3rd party would only recover to the extent of being not-at-fault, for instance, 100 % not-at-fault, 50% not-at-fault, 25% not-at-fault, and so on. Under Direct Compensation - Property Damage(DCPD), this same right of recovery is exercised against the insured's own insurer, with fault decided using the Fault Determination Rules.
What is SABS?
SABS(Statutory Accident Benefits Schedule): was created when lawsuits for injuries arising out of automobile accidents were limited by legislation.
SABS provides increased and wide-ranging Accident Benefits coverage
What benefits are provided under SABS?
1) Income replacement benefits(IRB)
2) Non-earner benefits - benefits those who are unable to lead a normal life because of an automobile accident but do not qualify for any of the other benefits
3) Caregiver benefits - benefits for those looking after dependants
4) Medical, rehabilitation, and attendant care benefits
5) Payment of other expenses
a) Educational expenses
b) Expenses of visitors
- c) Housekeeping and maintenance expenses
- d) Damage to clothing, glasses, hearing aids, etc.
e) Cost of examination
6) Death and funeral benefits - includes capital sums paid upon the death of insured persons and dependants
How do the Ontario Statutory Conditions differ from other provinces?
Statutory Conditions are similar but not identical to those in other provinces. The main differences are as follows:
a) If an insurer misclassifies a risk it must pay interest on any overpayment of premium by the insured.
b) Premiums may be paid monthly without any penalty but with interest payable at a rate governed by the regulations.
c) Subject to absolute liability and certain allowances provided under Accident Benefits, there is no coverage under the policy if the insured is not authorized by law to drive(no driver's license or license under suspension). Qualification to drive is not enough, as in some other provinces.
How is automobile insurance provided in New Brunswick?
Automobile insurance in New Brunswick is provided entirely through the private sector. New Brunswick has introduced its own version of Owner's Policy.
What coverages are mandatory in New Brunswick?
In New Brunswick,
Third Party Liability coverage is mandatory with 200,000 minimum required limit
Accident Benefits coverage
Uninsured Motorist coverage
When does Direct Compensation - Property Damage(DCPD) apply?
In New Brunswick, coverage under DCPD applies if
a) An automobile or its contents, or both, suffers damage arising directly or indirectly from the use or operation in New Brunswick of 1 or more other automobiles;
b) The automobile suffers the damage (or in respect of which the contents suffer damage) is insured under a motor vehicle liability policy issued by an insurer that is licensed to undertake automobile insurance in New Brunswick, or an insurer that has filed an undertaking with the New Brunswick Superintendent of Insurance to be bound by this section of the New Brunswick Insurance Act; and
c) At least 1 other automobile involved in the accident is insured under a motor vehicle liability policy issued by an insurer that is licensed to undertake automobile insurance in New Brunswick, or an insurer that has filed an undertaking with the New Brunswick Superintendent of Insurance to be bound by this section of the New Brunswick Insurance Act.
If you are a New Brunswick motorist and your vehicle is damaged by a 3rd party who is 100% at fault, from whom would claim for the damage?
their own insurer
What would you like to do?
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