Tuesday, January 29, 2013
No-Fault insurance is an insurance system whereby claims for auto accident losses are paid out immediately, and by the claimant’s’ own insurance companies. The system with which it is contrasted is the torte system, whereby responsibility for an accident has to be established first before the responsible actor’s insurance company pays out the damages to both parties. In Canada, provincial governments set the policy that holds across the individual provinces. As a result, the adoption of no-fault insurance has been uneven across the country.
Features of No-Fault Insurance:
- Both the responsible and non-responsible parties in an accident are entitled to reasonable compensation for damages, injuries, pain, suffering and financial losses. By contrast, the torte system does not award the responsible party full compensation for financial losses, pain and suffering, since she is considered to have been responsible for this herself.
- Insurance payouts occur almost immediately, because each insurance company is initially held responsible for its own client’s claims. The battle over responsibility for the accident can then take place later. Under the torte system, responsibility for the accident has to be established before responsibility for the payment is assigned, which leads to delayed payments.
- In order to compensate both the responsible and non-responsible parties, no-fault insurance limits the amount of compensation payable to the victim. By contrast, the torte system limits compensation to the responsible party so that the victim can be awarded a greater amount.
- Based on set criteria, the insurance companies determine the responsible party and save citizens the trouble of going to court to have this established. Under the torte system, court cases can drag on for long and cost private citizens a lot.
- The insurance company of the person found to be responsible for an accident will likely raise the premiums of the insured to recoup the cost of paying out the settlement to the non-responsible person’s insurer.
Saskatchewan was the first Canadian province to adopt some level of no-fault insurance in 1946. Quebec followed in 1977. Manitoba adopted it and Saskatchewan expanded their system to a more comprehensive no-fault option in the late 1990s. Both Alberta and British Columbia have now adopted it. In fact, it now exists in all Canadian provinces. The difference lies in the balance they establish between access to no-fault payouts and the right to sue the responsible party for further damages.
- In Manitoba, where the no-fault system has been comprehensively adopted, one cannot sue for pain, suffering or financial losses. Basic pre-determined payouts are paid to both the responsible and non-responsible parties with no recourse to the courts for further damages. The only other Canadian province to have implemented it equally complete is Quebec.
- In Alberta and British Columbia, the no-fault system applies, but victims are permitted to sue the responsible party for financial losses and for pain and suffering within strict limits.
- The same holds in Saskatchewan, but only if the insured person possesses a much more expensive torte insurance plan. Moreover, a large deductible applies, which means that the responsible party’s insurance company’s contribution is kept low. The default in Saskatchewan under almost all insurance plans is the complete no-fault system.
Residents are advised to remain informed on their respective provinces’ no-fault insurance policies in order to understand how their claims and payouts will be affected.