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Understanding Ontario’s Motor Vehicle Accident Recovery Scheme

The last thing an individual who has been injured in a motor vehicle accident wants to worry about is how to go about receiving compensation and assistance from their insurance company. In essence, the principles of insurance seem rather simple: you’ve paid a premium in case “something” happens, and now that“something” has happened and you’re seeking coverage. Unfortunately, the scheme put in place often leaves the injured person scratching their head, wondering what to do next.

In explaining motor vehicle insurance, one needs to understand the concept of liability insurance. Liability insurance is what protects you in the event that you cause an accident which injures an individual and/or their property. Most of us in Ontario carry a $1,000,000 liability policy with our motor vehicle insurance companies. This means that if you injured someone, and their injuries are valued at or under $1,000,000, your insurance company will pay (at least in theory) that amount. Any dollar over this $1,000,000 may be recoverable personally from the at fault party. For this reason, I always recommend that individuals take out a $2,000,000 policy. The increase in your insurance premium will likely be only a few dollars per month, but the extra $1,000,000 in coverage is certainly worth it.

Next, individuals should know that Ontario’s insurance scheme is split into two parts: the Statutory Accident Benefits, and what is known as a tort action.

Statutory Accident Benefits (SABS)

Statutory Accident Benefits, often referred to as SABS, are certain benefits which are standard in every motor vehicle insurance contract. These no-fault benefits flow from your own insurance company, in the event that you need them. You may be wondering, what is meant by the term no-fault? No-fault insurance simply means that regardless of whether or not you are at fault, you will have access to certain benefits. Let’s take a look at the example below for simplicity:

Sally is driving to work one morning. While she’s driving, her phone rings and she gets distracted while looking at it, and hits the car in front of her, which is being driven by Ralph. Fortunately, Ralph isn’t hurt at all, but Sally begins to suffer some neck and back pain after the accident.

Since Sally hit Ralph from behind, she is nearly always the at fault party (she “caused” the accident). Despite that, Sally is the one suffering with neck and back pain. In such a scenario, Sally would have access to a number of benefits (SABS) through her own insurance company. These benefits may include medical rehabilitation, income replacement, and attendant care, to name a few.

Now let’s take the above scenario and change it so that it was Ralph (the innocent person), who was injured. What changes? Not very much for the purposes of SABS. Ralph would go to his own insurance company, despite Sally being the at fault party, for his accident benefits.

When discussing SABS, it’s important to note that the benefits are not limitless. On the contrary, the last few years (specifically, post 2010), benefits through SABS have been greatly reduced and/or limited. While it is outside the scope of this article to discuss each benefit and their changes, the benefits are as follows:

– Income Replacement
– Medical Rehabilitation
– Non-earner Benefits
– Caregiver Benefits
– Housekeeping and Home Maintenance Benefits
– Attendant Care Benefits
– Other Benefits, such as visitors expenses, replacing damages eyewear/clothes as a result of the accident, etc.

Each benefit will have a set of requirements that the insured individual must meet in order to obtain the benefit. Further, as mentioned above, the benefits do have their limits.

Let’s take income replacement as an example. Income replacement benefits are to replace lost income, if, as a result of the accident, you suffer a physical or psychological impairment that would prevent you from working. The benefit is calculated at 70% of your gross income, based primarily on your income history prior to the accident. The maximum payment is $400 per week (unless you purchased optional benefits through your insurer), and it can go on for 104 weeks if deemed necessary. Post 104 weeks, the individual will have to suffer from a “complete inability to engage in any employment or self employment for which they are suited by education, training or experience.”

What really sticks out to most people is the $400/week cap (or $1,600/month). Let us go back to our above example, and this time, assume both Sally and Ralph were injured, and couldn’t return to work. Let’s also assume that their income, prior to the accident, was as follows:

Sally: $70,000/year
Ralph: $140,000/year

While Ralph makes twice as much as Sally, they would both qualify only for the $400/week cap for income replacement from their insurer. This is because 70% of each of their gross incomes, prior to the accident, is greater than $400/week – making them capped. So how does Ralph, the innocent party, recover the rest of his lost income? He does so by suing Sally in tort.

Tort Action

When you often hear of someone suing, or that they’re being sued, it’s very likely to be in a tort action. In essence, a tort action is a law suit where the not at fault party seeks compensation from the at fault party for their injuries and losses. These claims are typically found in negligence, and are often commenced after SABS benefits have begun. The biggest difference between a tort action and SABS, is of course, the fact that an at-fault party can’t successfully sue a non at-fault party. It is only the innocent individuals who should commence a tort action.

Unlike in SABS, the damage heads in tort are not specifically enumerated. This is not to say you don’t often see the same damages being claimed, but rather, that a tort action has nearly every avenue for damages and/or losses suffered by an innocent party as a result of the accident.

One of the more common damages you often see in tort, is that of “pain and suffering” (or “general damages”). Simply put, these damages are for the pain and suffering the innocent party endured as a result of the negligence of the at fault party. In order for one to be able to sue for pain and suffering, their damages must meet the “threshold.” There is a plethora of case law around what this “threshold” is, but for simplicity’s sake, it is when an injury is a permanent serious disfigurement, or, a permanent serious impairment of an important physical, mental or psychological function. If the injuries to the innocent party do not meet the requirements of the threshold, he/she is barred from suing for pain and suffering. Unfortunately, the battle does not end there, as there is a cap on the amount that can be recovered under this head. Moreover, for damages that are assessed to be under $100,000, there is a $30,000 deductible (which obviously eliminates any claim which would be worth $30,000 or less).

The other major heads of damages for tort are often what flows over and beyond the amounts available under SABS. For example, Ralph was able to get only $400/week for income replacement from SABS, which is far below what he was making weekly with an annual income of $140,000. As such, he would sue in tort for the difference (keeping in mind that there are some deductions due to provisions in the Insurance Act). Ralph would also be able to sue for future losses and loss of earning capacity, just to name a few heads of damages.
Ultimately, what needs to be taken away for the everyday insured individual is that insurance law in Ontario is a quickly changing, complex, scheme. Too often, individuals (and many times, inexperienced lawyers), do not understand the important relationship between SABS and tort. Many are quick to think that the two are distinct, and neither will have a role in the others potential settlements and/or litigation. It’s vital that injured individuals get a lawyer who understands both schemes and is able to use them to maximize recovery.

Milad A. Tafakori

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