Generally speaking, no-fault insurance means that if a person has been injured in a motor vehicle accident or their vehicle has been damaged, no matter who is at fault, that person’s insurance company will pay for their losses. Any injuries or damages with respect to the other driver involved in the accident will be covered by the other driver’s insurance company.
Based upon the experience of no-fault insurance in the United States and other provinces in Canada, no-fault insurance regimes do not necessarily reduce premiums. In fact, this type of auto insurance system often leads to higher costs, fewer protections for consumers and a lack of accountability for bad drivers and insurance companies.
Under a no-fault system, administrators, physicians, treatment providers and experts hired by the insurance company will make all of the decisions with respect to the injured party, including:
- Whether he/she is capable of returning to work;
- The cost of future care;
- The duration of his/her disability;
- The severity of the injury; and
- The compensation stemming from all of the above factors.
Those who are injured will deal directly with their insurance company, without any legal advice or support. Innocent victims will have no right to sue for damages, such as lost income, in court. A “benefits schedule,” a chart outlining a dollar amount for each type of injury, will determine how much an impairment is worth.
In terms of income loss, a no-fault system does not take into account an individual’s personal situation and future prospects. It simply provides compensation based upon the position the victim was in and the income he/she was making at the time of the accident.
Consider a medical student injured in a motor vehicle accident as a result of another driver’s negligence who is left permanently unemployable by the injuries sustained. The income replacement benefits they receive would be based on their earnings as a student with no consideration for the income they would have achieved upon completion of medical school.
B.C. and No-Fault Automobile Insurance
In February, British Columbia’s government announced that, in an effort to reduce public auto insurance rates by 20 per cent, it would be moving to a no-fault auto insurance system effective May 1, 2021 (if the proposed legislation passes).
Under the proposed no-fault system, litigation will only be possible if an injured driver is involved in a collision with an individual who is charged with a criminal offence or if a manufacturer or repair facility has performed faulty work on a vehicle.
Compensation for pain and suffering for minor injuries will be eliminated and categories for major injuries will be set out for pain and suffering with a specified maximum amount.
British Columbia’s trial lawyers are expected to challenge this initiative and argue that a no-fault regime will reward bad drivers and remove innocent victims’ rights to receive access to the courts and a fair settlement.
What Challenges Lie Ahead for Drivers in Alberta?
If the Alberta government implements changes to auto insurance in the form of a no-fault insurance system, it will likely benefit auto insurance companies at the expense of the rights of Albertans.
A no-fault system takes away an individual’s right to sue. The no-fault regime itself decides what compensation an innocent victim of a motor vehicle accident should receive. This removes the due process that occurs through litigation with effective representation.
Insurance companies attempt to justify increases in insurance premiums due to increased payouts to injured Albertans. However, in reality, over the last three years the overall compensation for bodily injury claims has dropped, while insurance company premiums and profits have continued to rise, according to a 2020 report conducted by actuary Craig Allen.
Albertans have spoken and their response to no-fault auto insurance is clear. In a poll conducted by FAIR Alberta and Nanos Research released in June, 61 percent of Albertans prefer the current fault-based system providing accountability for bad drivers and allowing injured victims the right to sue for fair damages to compensate for their injuries.
Those surveyed were found to put more trust in the courts to provide an impartial and fair compensation assessment following an accident compared to insurance companies, which stand to benefit when compensation is minimized.
This article was originally published by The Lawyer’s Daily, part of LexisNexis Canada Inc.
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