Sure, You Have Auto Insurance, but Do You Have Enough?

Nobody is immune from the risk of an accident.

If you live in Ontario and own, lease or finance an automobile, it’s the law that you have auto insurance if you wish to operate the vehicle on public roadways. But aside from complying with legal obligations, obtaining an insurance policy on your vehicle helps to protect yourself and your family’s assets against claims made against you following a car accident.

Motor vehicle accident injuries can range from minor bruises to life-altering traumatic brain injuries and death. Injured individuals can make a wide range of claims against the at-fault drivers and owners of vehicles, including those for pain and suffering, past and future economic loss resulting from an inability or decreased ability to work, and many other expenses stemming from the injured person’s condition. Further, the person’s family can claim for expenses incurred for the benefit of the injured person and also for monetary damages for a loss of care, guidance and companionship.

Most often, standard motor vehicle policies are limited to $1 million in coverage. This means, in the absence of coverage issues, that the insurer will indemnify and defend the policy holder up to $1 million dollars plus legal costs and pre-judgment interest that has accrued on a claimant’s damages entitlement. The insurer will pay a claimant’s damages and will hire a lawyer to represent the policy holder’s interests.

However, insurers’ obligations to indemnify and defend are limited by the amount of coverage in a policy. For example, if a claim is asserted for $2 million, an at-fault driver will be personally responsible for any of a claimant’s damages in excess of their policy limits. The policy holder will not have the benefit of indemnity or a lawyer to defend against the remaining $1 million claim. The claimant will look to the at-fault driver’s assets to cover the remaining damages. Further, the driver or owner must pay for its own legal counsel.

Over the past couple of decades, the amounts of claims made by individuals involved in motor vehicle accidents have increased substantially. It is no longer the exception that claims are asserted for damages in excess of $1 million. With the recent changes of September 2010 in relation to Statutory Accident Benefits (insurance coverage that individuals claim against their own insurers), it is anticipated that claims will continue to increase against at-fault drivers.

There are a couple of ways to protect yourself and your family from these increasing claims. Firstly, for a modest increase in your premium, policy limits can be increased to amounts greater than $1 million. Secondly, an “umbrella policy” can be obtained, which has the effect of bringing in insurance coverage from your home insurance policy. In this way, drivers and owners of vehicles can protect themselves and prevent exposure to claims for damages that would otherwise be in excess of their policy limits and the significant legal costs and interest associated with motor vehicle accident cases.

Andrew Keesmaat
Civil Litigation