Post by Sapphire Capital on Oct 9, 2008 22:17:41 GMT 4
Deconstructing Automobile Insurance Coverage in Canada
Erik S. Knutsen
Queen's University Faculty of Law
September 1, 2008
Abstract:
The driving public cannot reliably predict what is covered and what is not covered by their automobile insurance. Neither can lawyers assisting accident victims or auto insurers. This needs to change. For example, if a parent drops a child off to play and the child is seriously hurt crossing the street, is the child covered by first party no-fault automobile benefits? Is the parent protected by his third party liability insurance? Can the child access any underinsured or uninsured first party liability policy in the event of a shortfall in available compensation? Or is the child's loss not covered at all? The answer, according to the Supreme Court of Canada: it depends.
The standard Canadian automobile insurance coverage clause insures against accidents arising out of the "ownership, use or operation of a vehicle." The same clause is used in coverage provisions for both first party no-fault benefits and third party liability insurance. First party no-fault benefits are triggered without regard to the fault of the driver. These benefits provide compensation to the accident victim, under the accident victim's own insurance policy. Third party liability insurance is triggered when the accident victim sues the at-fault tortfeasor who caused the accident. It is the at-fault tortfeasor's liability insurance which the accident victim is seeking to trigger. Access to either of these coverages depends upon whether or not the accident arose out of the "ownership, use or operation of a vehicle." Yet, what is "ownership?" What is "use?" What is "operation?"
The Supreme Court recently significantly narrowed the scope of automobile coverage by creating two interpretive tests for two types of insurance, a broad test for first party no-fault benefits and a narrower test for third party liability insurance. Despite the broad coverage clause, the Court held that auto insurance coverage can only be triggered in the third party liability situation if the at-fault tortfeasor is at fault as a motorist. The Court's aim surely must have been to simplify the coverage question by restricting automobile coverage to standard two-vehicle auto collision situations and their corollaries. The shift to this default rule, from the previous default rule of pro-coverage as long as a vehicle is essentially in the factual matrix, surprisingly does not do anything to ameliorate the efficiency of the system. In fact, it makes the system more unpredictable.
This article has three aims:
a) to identify problems in the Supreme Court's recent auto coverage analysis, with an aim to curbing future misapplications in both auto and non-auto insurance contexts;
b) to provide some predictability as to how standard auto coverage issues should now be assessed; and,
c) to detail how Canada's auto insurance coverage analysis could, and should, fit into the insurance world in a larger context.
By examining the Supreme Court's current approach to automobile insurance coverage, a warning emerges to adhere to standard insurance law interpretation concepts and avoid a results-driven approach which puts principle by the wayside. For, in the end, the desired result may actually be a less efficient response than the current status quo.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1262765_code568504.pdf?abstractid=1262084&mirid=1
Erik S. Knutsen
Queen's University Faculty of Law
September 1, 2008
Abstract:
The driving public cannot reliably predict what is covered and what is not covered by their automobile insurance. Neither can lawyers assisting accident victims or auto insurers. This needs to change. For example, if a parent drops a child off to play and the child is seriously hurt crossing the street, is the child covered by first party no-fault automobile benefits? Is the parent protected by his third party liability insurance? Can the child access any underinsured or uninsured first party liability policy in the event of a shortfall in available compensation? Or is the child's loss not covered at all? The answer, according to the Supreme Court of Canada: it depends.
The standard Canadian automobile insurance coverage clause insures against accidents arising out of the "ownership, use or operation of a vehicle." The same clause is used in coverage provisions for both first party no-fault benefits and third party liability insurance. First party no-fault benefits are triggered without regard to the fault of the driver. These benefits provide compensation to the accident victim, under the accident victim's own insurance policy. Third party liability insurance is triggered when the accident victim sues the at-fault tortfeasor who caused the accident. It is the at-fault tortfeasor's liability insurance which the accident victim is seeking to trigger. Access to either of these coverages depends upon whether or not the accident arose out of the "ownership, use or operation of a vehicle." Yet, what is "ownership?" What is "use?" What is "operation?"
The Supreme Court recently significantly narrowed the scope of automobile coverage by creating two interpretive tests for two types of insurance, a broad test for first party no-fault benefits and a narrower test for third party liability insurance. Despite the broad coverage clause, the Court held that auto insurance coverage can only be triggered in the third party liability situation if the at-fault tortfeasor is at fault as a motorist. The Court's aim surely must have been to simplify the coverage question by restricting automobile coverage to standard two-vehicle auto collision situations and their corollaries. The shift to this default rule, from the previous default rule of pro-coverage as long as a vehicle is essentially in the factual matrix, surprisingly does not do anything to ameliorate the efficiency of the system. In fact, it makes the system more unpredictable.
This article has three aims:
a) to identify problems in the Supreme Court's recent auto coverage analysis, with an aim to curbing future misapplications in both auto and non-auto insurance contexts;
b) to provide some predictability as to how standard auto coverage issues should now be assessed; and,
c) to detail how Canada's auto insurance coverage analysis could, and should, fit into the insurance world in a larger context.
By examining the Supreme Court's current approach to automobile insurance coverage, a warning emerges to adhere to standard insurance law interpretation concepts and avoid a results-driven approach which puts principle by the wayside. For, in the end, the desired result may actually be a less efficient response than the current status quo.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1262765_code568504.pdf?abstractid=1262084&mirid=1