Of all insurance terms that many motorists find confusing, perhaps none create misconceptions more easily than “no fault.” When we think of fault in regards to a car accident, we usually consider who caused the accident. It’s natural to assume “no fault” means that it no longer matters who caused an accident. Some drivers think that “no fault” means that, even if they caused an accident, their insurance premiums aren’t affected.

This isn’t the case, however. In Ontario, fault is very much a part of the auto insurance system, and in ways many consumers don’t realize. Let’s unravel the various uses of the fault concept and set the record straight for all auto insurance consumers.

What does no fault insurance mean?

When it comes to Ontario’s auto insurance program, “no fault” refers to provisions of an auto insurance policy that pay out from the policyholder’s own insurance company, rather than the other driver’s, regardless of who caused the accident. To expedite access to funds after an insurable incident, some elements of a basic car insurance policy pay out from a driver’s insurance company, so there is no delay in settling claims with another insurer.

The insurance system in Ontario blends no fault provisions with traditional tort-based insurance. Tort refers to the ability to sue others for loss or damage suffered due to their actions. That means one driver can sue the driver who caused the accident. This fault is called liability in insurance circles.

This creates aspects for which a driver can and cannot sue the at-fault driver. While that seems somewhat confusing, it makes more sense when we look at the basic components of mandatory coverage and how each fits into the mixed tort/no fault system.

How does no fault insurance work in Ontario?

Of the four basic components of the insurance policy that the government requires as mandatory, three get paid by a driver’s own insurer to the driver, if they apply to a particular claim. These components are:

  • Third Party Liability — this section protects a driver against lawsuits from others, when the driver is at fault. Payments move from the driver’s insurance company to the third party upon reaching a settlement. This is a tort-based provision.
  • Accident Benefits — includes health care and rehabilitation expenses stemming from an insurable incident. This can also include loss of income, attendant care, death and survivor benefits. Benefits pay through the driver’s own insurance company, regardless of who caused the incident. Accident benefits are a no fault portion of provincial legislation.
  • Direct Compensation-Property Damage — this component covers loss and damage to your vehicle and its contents, as well as loss of use. Though caused by another driver, under certain circumstances, the driver’s own insurer pays the claim. This is a no fault provision of provincial coverage. To qualify under this insurance section, an accident must:
    • occur in Ontario.
    • involve two or more vehicles,
    • an Ontario company insures at least one of the other vehicles.
  • Uninsured/Under-insured Motorist — This provision pays by the driver’s own company when a collision results through the actions of a driver without insurance, without enough coverage, or who leaves the scene and cannot be identified. While this section pays out from a driver’s own insurer, it’s an additional required protection, not truly a no fault provision.

When did no-fault insurance start in Ontario?

Murray Elston, Ontario’s minister of financial institutions. introduced the Ontario Motorist Protection Plan legislation on September 15, 1989. Billed at the time as a social safety net to enhance access to health care for accident victims without a need to sue.

The province experienced a liability crisis following a 1985 lawsuit. Even though the results of the suit overturned on appeal, the shock waves spread across the both the province and the insurance industry, affecting products other than only auto insurance. The current no fault provisions took effect in June 1990.

Is no fault insurance mandatory in Ontario?

Yes. No fault provisions comprise the basic, mandatory policy required for all vehicles using public roads in Ontario. Provisions don’t alter or substitute, so all drivers face the same blend of tort and no fault coverage. No fault, in this regard, is a concept embedded in the statutory insurance requirement, not a feature or option.

No fault insurance: who pays deductible?

Because of the no fault provisions in use in Ontario, it’s sometimes not clear to drivers who pays the deductible in the various accident scenarios. Along with that, there’s often confusion about the effects accidents have on insurance policies. The general rule is that the at fault driver — and his insurer — pay, while the other driver or drivers do not.

However, fault is not always allocated 100 percent to a single driver. When fault splits between two or more drivers, each pays according to the percentage of fault assigned. So if a driver has 50 percent fault assigned, they pay 50 percent of their deductible. Which insurance company pays the remainder depends on several things, including the DC-PD rules.

Fault determination rules

fault determination

An important concept behind Ontario’s no fault strategy involves quick settlement of claims. To aid insurers in accomplishing this, fault assigns in an accident by comparing the actual incident to one of over 40 fault determination scenarios. These make up the fault determination rules, part of the original Ontario Motorist Protection Plan from 1990.

Insurance investigations always assign 100 percent fault, no matter how it is split between drivers. These assignments come from the fault determination rules even when the closest match isn’t particularly close. Also, these may have nothing to do with the results of a police investigation. It’s possible that a driver charged with a traffic offense escapes fault in the insurance investigation. As well, a driver not charged by police could be all or partially at fault in the insurance investigation.

Because of this, there is a two-level appeal process if a driver disagrees with the fault determination and believes that it does not reflect the actual events surrounding the accident. Any time a driver receives more than 25 percent of the fault for an incident, it’s likely that it will trigger an increase in insurance premiums. Therefore, accurate fault determination can save a driver money.