The Insurance Act1 (the act) is the primary statue regulating insurance in Ontario, including automobile insurance. It creates standardized car insurance policies. However, it also limits an automobile victim’s right to sue the wrongdoer for full compensation in a common law tort action in two key ways, both of which will be addressed in a straightforward manner below.
1) Protected Defendants
First, the act creates ‘protected defendants’. These include the owner of an automobile, the occupants of an automobile and any person present at the accident. These defendants enjoy protection from certain types of legal responsibility. The Act does this by setting limits on a victim’s ability to sue protected defendants for loss of income, and creating the ‘threshold’.
The Act removes a victim’s right to sue protected defendants for certain income loss. 2 A victim cannot sue for income loss occurring within seven days after the accident. A victim can only receive 70% of their lost gross income for the time period before the trial, and can only recover 70% of their lost earning capacity for the time period after the trial.3 Generally no other avenues exist for a victim to recover this 30%, and they will not receive full compensation.
In addition to limiting recovery for income loss, the Act permits only very severely injured victims to sue protected defendants for medical expenses4, or non-pecuniary damages5; which include pain and suffering, the loss of enjoyment of life, the loss of companionship, and emotional distress. To succeed in a lawsuit for medical expense or non-pecuniary damages, an injured person must prove they sustained either: (a) a permanent serious disfigurement; or, (b) a permanent serious impairment of an important physical, mental, or psychological function. This is a complex legal test commonly referred to as the ‘threshold’. Victims who do not meet the threshold will not have the opportunity to seek full (or any) compensation for medical expenses and non-pecuniary losses in a tort claim.
2) Reductions to Tort Damages
Second, the act limits an accident victim’s right to sue for full compensation in tort by creating a number of reductions to damages awarded to the victim by the Court.
A major reduction is made to non-pecuniary (pain and suffering) damage awards. Specifically, for any non-pecuniary damage award less than $100,0016, the Court must reduce the award by $30,0007. This can result in at least a 30% reduction to some non-pecuniary damage awards, or eliminate them altogether. In such situations, the accident-victim will not receive full compensation for non-pecuniary losses. Reductions to a tort award are also made where insurance funds are available for loss of income and earning capacity, healthcare expenses, and other out-of-pocket expenses.
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- Insurance Act, R.S.O. 1990, Chapter I.8.
- Ibid, s. 267.5 (1).
- These numbers are accurate for accidents occurring on or after September 1, 2010. Prior accidents may receive up to 80% of net income before trial, and 80% of net loss earning capacity after trial.
- Supra note 1, s.267.5 (3).
- Supra note 1, s.267.5 (5).
- Supra note 1, s.267.4 (8).
- Supra note 1, s.267.5 (7) 3 i, and Ontario Regulation 461/96, s.5.1 (1).
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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Disclaimer: This article is intended to supply general information to the public. We make every effort to ensure the accuracy of this information. However, as laws change quickly, the reader should always ensure the accuracy and applicability of such information with respect to their particular case. The information contained in this article cannot replace a thorough and complete review of the reader’s situation by competent legal counsel who has had an opportunity to review all of the facts.