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What is no-fault car insurance?

No-fault insurance allows drivers involved in an accident to each file claims to their respective car insurance providers to get the coverage they need to pay for damages to their vehicles and injuries quickly. Insurance companies are required by law to assign a percentage of the blame to each motorist involved in an accident. Sometimes, only one driver is at-fault for an accident, and the other is not at fault. Other times, both drivers can be found to be at-fault to varying degrees.

All provinces have some aspects of no-fault auto insurance, but the systems have nuances and differences.

No-fault car insurance in Ontario

Ontario has a no-fault car insurance system, but this does not mean no one is at fault in an accident. The term "no-fault" insurance simply means if you are injured, or your car is damaged in an accident, you deal with your insurance company, regardless of who is at fault. You don't have to go after the at-fault driver for compensation.

Similarly, if any passengers in your car are injured, then each passenger with a car insurance policy will approach their own insurance company for benefits. If your passengers do not have a car insurance policy, your insurance company may pay benefits to them. The driver of the other car involved in the accident will claim benefits from his or her insurance company.

Someone is always deemed "at fault" in a car accident, partially or fully. The law requires insurance companies to assign the percentage of fault for each driver involved in the accident. This is done by using the "Fault Determination Rules."

Before no-fault insurance was introduced in Ontario in 1990, you would have to sue the other driver to recoup damages you incurred from an accident. Insurance companies would go to court to argue about who was at fault in an accident. It was a drawn-out process that left drivers with damaged vehicles in limbo, waiting for the case to be settled. It was costly, inefficient, and for drivers, maddening to have to wait for a decision to be made in court.

No-fault insurance changed everything by simplifying and speeding up the claims process. Now, insurers pay their customers' claims sooner, including the damages to your vehicle and any health care and rehabilitation costs.

No-fault car insurance in Quebec

One of the founding principles of Quebec's automobile insurance plan is no-fault coverage for everyone, regardless of who is responsible for a given accident.

This means that Quebecers involved in a traffic accident in Quebec are covered by the plan, regardless of whether or not they are responsible for the accident.

As the no-fault compensation principle does not take responsibility for an accident into account, individuals or companies cannot initiate legal proceedings against the person responsible for a traffic accident.

No-fault car insurance in B.C.

British Columbia overhauled its auto insurance system by implementing a new plan called Enhanced Care. The changes are supposed to reduce insurance rates by 20%, which averages out to $400 per driver annually.

People injured by reckless drivers are now limited in their ability to take legal action and pursue fair compensation for their losses. ICBC also assumed more control and decision-making authority over how compensation is awarded when Enhanced Care took effect.

No-fault auto insurance means that B.C. residents may receive benefits for their injuries and wage loss after a crash, regardless of who was at fault. It's also known as first-party coverage.

Under Enhanced Care, accident victims will not be able to sue the at-fault driver, except in cases where the driver is convicted of an offence, like driving while intoxicated.

No-fault car insurance in Alberta

Under the current Alberta no-fault system, damages are paid for by the insurance company of the person deemed to be “at-fault,” and you have a right to sue the at-fault driver's insurance company for a settlement. This means bad drivers pay for the damage they cause.

Alberta has also adopted the direct compensation property damage (DCPD) system, in which drivers who are not totally at fault for causing an accident will receive some compensation to repair or replace their vehicle.

No-fault car insurance in Saskatchewan

All Saskatchewan residents have no-fault car coverage unless they file a declaration to choose tort coverage. That means if you haven't filed a declaration choosing tort coverage, you have no-fault coverage. You must file another declaration if you have tort coverage and wish to change to no-fault coverage.

No-fault coverage provides a comprehensive package of benefits that cover most of your expenses if you're injured in a collision, regardless of who is responsible. No-fault coverage includes the following, as needed:

• Rehabilitation
• Medical, personal and travel expenses
• Living assistance
• Permanent impairment payment
• Death benefits

No-fault car insurance in Manitoba

Manitoba Public Insurance (MPI), a government-owned monopoly insurer, provides mandatory auto insurance. Under the province's no-fault system, MPI pays for the accident benefit claims of those injured in Manitoba auto collisions.

Accident benefits, third-party liability and uninsured auto coverage must be bought from Manitoba Public Insurance.

Those injured in Manitoba collisions do not have the right to sue for pain and suffering for financial loss in excess of no-fault benefits.

No-fault car insurance in New Brunswick

New Brunswick applies a no-fault insurance system to property damage claims. This means that no matter who is at fault in an accident, your own insurance company will pay for the repairs to your vehicle. Liability coverage for the at-fault driver will pay accident benefits, including medical bills and loss of income.

Fault is determined in an accident in accordance with the New Brunswick Fault Determination Rules as set out in the Insurance Act. These rules give insurance companies a single basis to work from when deciding who was at fault in an accident, preventing bias from entering the picture.

No-fault car insurance in Nova Scotia

The no-fault insurance system in Nova Scotia does not mean that an at-fault driver is not responsible for your injuries or damages in an accident. Rather, it means you go through your auto insurance company when you file a claim for compensation for damage to your vehicle. This is known as a first-party claim.

No-fault car insurance in Prince Edward Island

In 2015, the PEI government passed legislation that changed how accidents are handled by introducing direct compensation for property damage. Each driver’s insurance company will pay for their own damages. The province also increased no-fault accident benefits. As of 2017, some insurers have increased their premiums to compensate for the increase in benefits.

No-fault car insurance in Newfoundland and Labrador

Newfoundland and Labrador vehicle owners must buy insurance coverage from a private insurer. The right coverage is essential. By law, drivers must buy a mandatory amount of insurance.

Service NL provides specific guidelines for drivers and vehicles.

In 2020, Newfoundland and Labrador adopted a direct compensation insurance model. This means in an accident with two or more cars, the drivers found not at fault for the collision will receive compensation from their insurer to repair or replace their car; they may be able to recoup up to 100% of the costs.

How is fault determined in a no-fault system?

No-fault provinces have a set of rules that make collision investigations more efficient. They're known as fault determination rules, and they’re laid out within each province's Insurance Act. 

Insurance adjusters are tasked with investigating collisions. Each driver involved in the collision will have an adjuster assigned to them by their insurance provider. The fault determination rules guide the investigation; dozens of collision scenarios are laid out, with clearly spelled out guidance on which driver is at fault in each one.

Adjusters might interview you and any witnesses at the scene, consult police and hospital records, and inspect property damage. In Ontario, factors like weather conditions, visibility, or the actions of pedestrians are considered irrelevant to the investigation.

Since there are many scenarios in which the fault is shared, adjusters assign fault in percentages. A driver can be 100%, 75%, 50%, 25%, or 0% at fault. 

The insurance adjusters will work together to make a final judgment. If you're found to be above 50% at fault, the collision will negatively affect your insurance premium at renewal. At-fault collisions stay on your insurance history for at least six years though it varies by insurer. However, you can purchase a claims forgiveness endorsement that ensures your premium doesn't go up after your first at-fault accident.

If you don't agree with the final fault assessment, you can challenge it. Each insurance company has an ombudsperson that you can contact to make your appeal. 

Failing that, you can If the ombudsperson investigating your claim sides with the insurance company's original decision, you have one other option: contacting Canada's General Insurance OmbudService (GIO) to help you reach an agreement on your claim with your insurer. Be advised that not all insurers are GIO members, and an insurer can refuse to accept a resolution proposed by GIO.

How does no-fault insurance affect auto insurance rates?

It depends on your home province. The province with the purest no-fault system, Quebec, also has the lowest auto insurance premiums in the country at $857 per year, according to 2020 data from the Insurance Bureau of Canada. 

A major contributor to Quebec's cheap rates is that drivers don't have the right to sue for damages at all. Another is that drivers don't purchase accident benefits from private insurance companies; instead, this benefit is covered by the Société de l’assurance automobile du Québec (SAAQ or licence bureau), which covers all residents of Quebec, including non-drivers. 

By contrast, under Ontario’s limited no-fault system, accident benefits must be purchased from private insurers. On top of that, the accident benefit in a standard policy is quite comprehensive and complex. Ontario drivers can also sue for things not covered by insurance, like pain and suffering. 

The extensive coverage brings additional cost, and the complexity and the ability to sue for additional damages bring lawyers back into play — and that is never cheap.