Automobile Injury Compensation Systems… Explained

When an automobile accident happens, it may not be clear who is responsible for compensating the many possible injured victims. This post will attempt to explain in straightforward terms the general legal landscape for automobile accidents in Ontario.


After a serious automobile accident, there are generally two systems of compensation open to victims; the ‘tort’ system and the ‘first-party’ system.


Historically, a victim would sue the wrongdoer for monetary compensation in a common civil action, or ‘tort’. At the heart of the tort system is the ‘full compensation principle’. This principle means the essential purpose of tort law is to restore the plaintiff to the position he or she would have been in but for the negligence of the defendant. 1


Through the 1990’s, the province of Ontario began passing laws limiting the broad right of an injured person to sue the alleged wrongdoer or ‘tortfeasor’ in the automobile context. In its place the government provided a comprehensive scheme of benefits to be included in every auto insurance policy. This second system is known as ‘first-party’ or ‘no-fault’ insurance, because everyone is able to seek benefits from their own insurer regardless of who is to blame for the accident.


The purpose of the two-system design in relation to the injured party has been discussed by the Court of Appeal for Ontario:


… [t]he legislation appears designed to control the cost of automobile insurance premiums to the consumer by eliminating some tort claims. At the same time, the legislation provides for enhanced benefits for income loss and medical and rehabilitation expenses to be paid to the accident victim regardless of fault.2


Whether the tort and first-party design adequately achieves its goals in a profit driven insurance industry is a matter of constant debate. As a result, the legal landscape and boundary between the first party and tort system is continually changing in significant ways even today.


To learn more or to discuss your motor vehicle accident, contact your team at Kotak today!


  1. Athey v. Leonati, [1996] 3 SCR 458
  2. Meyer v. Bright, 1993 CanLII 3389 (ON CA)



The contents of this blog are intended to provide general information on the law. It is not intended to form any solicitor-client relationship. Readers are encouraged to seek independent legal advice.


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