CAIB 1 Chapter 6 Slides - Auto Insurance Fundamentals PDF

The Muddiest Point Students take two minutes to write down the most confusing concept for you right now. What do you find difficult to understand? Remember the Forgetting Curve! Insurance Graphic Organizer Please explain “Environmental Exclusions, giving details and examples for exclusions and other amendments. The following slides contain the information needed to answer this question. Environmental Exclusion Under Liability Rider: NO COVERAGE for liability of insured FOR: Emission/release/discharge/dispersal/esca pe/disposal of smoke/gases/vapours/soot/fumes/acids/alk alis/toxic substances/waste materials/irritants/contaminants/pollutan ts into/upon land/water - any description ○ Regardless of location/how contained/into drainage or sewer system/into atmosphere Major possible sources of losses EXCLUDED are due to: Smoke - grass ﬁre (in insured’s premises) Vapours - hog/dairy/poultry operations Contaminated rivers/lakes/streams/underground water sources - manure (piles) Environmental Exclusion Cont’d Exclusion DOES NOT APPLY When bodily injury/property damage is from emission/release/discharge/ dispersal/escape from accident (proof lies with insured) Other amendments to exclusion to cover bodily injury/property damage from: Heat/smoke/fumes from (hostile) ﬁre Accidental chemical drift (spraying on premises) other than using an aircraft Usually damage must be detected within 120 hours of spraying IF is to be covered Please explain “Environmental Exclusions, giving details and examples for exclusions and other amendments. Answer Chapter 6 - Basics of Personal Auto Insurance Section 1 - Need for Auto Insurance Cost of Auto Accidents Canada’s private auto insurers pay more than $7 billion for: ○ 1) Deaths/Injuries ○ 2) Damage to Property 1) Death/Injuries ○ “Human” cost 4,000+ people die (auto accidents) 275,000 are injured every year (in Canada) ○ Auto accidents’ “economic” impact on victims/families/society ○ A lot of money is spent by insurers to pay: Court awards to victims/their families Death beneﬁts/funeral expenses Other accident costs (medical payments/rehabilitation/loss of Section 1 - Need for Auto Insurance The Cost of Auto Accidents 2) Damage to Property ○ 2007: Cost per insured vehicle for collision claims = increase of 8.9% vs 2006 ○ Cost per insured vehicle (comprehensive claims): 7.2% increase 2007 vs. 2006 (non-collision damage: theft/ﬁre/ﬂying objects) ○ Frequency of accident beneﬁts (personal injury) claims (2007) 3.8% increase 2007 vs. 2006 Auto Insurance: Major Source of Premium Income Auto insurance is main product of many Canadian brokerages 2007: auto insurance premiums ○ $16 billion+ (46% of all premiums that year) Note: Statistics in text apply to private auto insurance industry ○ Insurance plans in BC, Saskatchewan, Manitoba, Quebec MIGHT be similar to private brokers. Brokers in these provinces should be able to obtain statistics from their government insurer. Compulsory in All Provinces Insurance coverages are not voluntary. If they were, society would have to pay to restore property, rehab for accident victims, and maintaining families 1) Third Party Liability (common law) ○ Everyone is generally responsible for actions & their ﬁnancial consequences ○ All provinces: Financial responsibility laws require motorists to establish that they have the ﬁnancial ability to pay loses (MIN limit) ○ Owners of private passenger type autos in all provinces must carry MIN $200,000 third party liability Exception: Quebec ($50,000)/Nova Scotia ($500,000) If claim is bodily injury AND property Auto Insurance Compulsory in All Provinces Cont’d 1) Third Party Liability Insurance Policy ○ Common Ways of Complying with Financial Responsibility Laws ○ In some provinces: auto owners show ﬁnancial responsibility by posting bond/cash/securities ○ Most common: buy insurance policy (proof of ﬁnancial responsibility) Proof of responsibility (depends on province) ○ 1) Inter-Province Motor Vehicle Liability Insurance Certiﬁcate (Pink Card) Private insurers’ pink card = proof ○ 2) Certiﬁcate of vehicle registration Provinces with compulsory gov’t auto insurance plans, the Pink Copy of registration certiﬁcate = proof Auto Insurance Compulsory in All Provinces Cont’d 1) Third Party Liability Losses Due To Uninsured Drivers ○ Funds established (in all provinces) ensure victims have some compensation. Names of these funds vary between provinces: Unsatisﬁed Judgement Fund Judgement Recovery Fund Highway Victims Indemnity Fund Ontario/Atlantic Canada = own insuring agreement discussed later in chapter ○ No funds in NW Territories/Yukon Territory/most of USA Auto Insurance Compulsory in All Provinces Cont’d 2) Accident Beneﬁts (form of no fault insurance) Compulsory coverage - All common law provinces (Except Newfoundland) Accident beneﬁts (auto policies pay) may include: ○ a) Medical Payments ○ b) Funeral Expenses ○ c) Disability Income Beneﬁts ○ d) Death Beneﬁts ○ e) Dismemberment/Permanent Impairment Beneﬁts Beneﬁts available to injured insured (auto accident) regardless of fault ○ Claimed from each injured party’s insurer ○ Eliminates unnecessary delays (collecting legal action) ○ If legal action, courts may order amount over what is provided in this section to Auto Insurance Compulsory in All Provinces Cont’d 3) Physical Damage Saskatchewan/Manitoba ○ Residents must buy physical damage coverages for (most) autos that are licensed for public roads ○ Coverage required from gov’t insurer in provinces (subject to deductibles) Manitoba $400 Saskatchewan $700 Deductibles depend on vehicle type ○ Ex. Trailers = reduced deductible ○ Ex. Large commercial trucks may not have mandatory Physical Damage Coverage Private V. Government Insurers 1) Government Insurers 1944: Saskatchewan = 1st compulsory auto insurance plan in North America established, due to: ○ Only 40% of motorists had third party insurance ○ Most bodily injury/property damage claims were uninsured. Decision Made: ○ CCF Gov’t formed crown corporation: min limits of insurance (all motorists) Private insurers in Sask. = reduced Other provinces soon followed suit BC, Saskatchewan, Manitoba ○ Residents must buy compulsory coverages from gov’t ○ Coverages under each plan = Described in Auto Insurance Acts and in regulations in Private V. Government Insurers Cont’d 2) Private Insurers (majority of auto policies in Canada) Superintendent of Insurance requires every application form/policy/ endorsement/renewal/continuation certiﬁcate for auto insurance be approved before being used Alberta, Atlantic Provinces, Yukon Territory, NW Territories ○ Coverage issued: Standard Policy Form No. 1 - Owner’s Form ○ Changes/additions to policy by Standard Endorsement Forms (S.E.F.s) BC, Sask., Mb: Private insurers compete with gov’t for EXCESS coverage ONLY ○ Coverages from private insurers have separate extension policies ○ Ontario has separate forms/rules-Forms are O.P.F./O.E.F QC require coverage to be purchased under Private V. Government Insurers Cont’d Role of Facility Associations Insurance coverage must be available for EVERY licensed driver ○ if standards aren’t met, coverage may be denied To ensure availability of coverage (to those refused coverage) ○ Facility Association (each province) ○ Insurers writing auto liability insurance = members/share pool results ○ Each Brokerage designated a Servicing Carriers that issues policies/policyholder support services to insureds If party is insured by Facility Association is able to qualify for regular coverage, then they are removed from the pool Private V. Government Insurers Cont’d No Fault Insurance Plans ○ Some provinces have NO FAULT Auto Insurance Plans ○ Primary purpose: Give beneﬁts to injured parties (auto accidents) regardless of fault ○ Different from traditional injury reimbursement (tort system) Recovery of damages based on victim suing person responsible PURE NO FAULT plan: ○ Removes right to legal action against parties responsible ○ All accident victims/legal reps can claim compensation (from own insurers) ○ Used in MB, QC Private V. Government Insurers Cont’d No Fault Auto Insurance Plans Threshold No Fault: Used in Ontario Legal action against party responsible not permitted unless exceeds threshold ○ Threshold can be monetary, or ○ Relate to severity (of injuries) Ex. Seriously injured may sue (pain/suffering) as long as $ threshold is met ○ NOT for lost income/economic losses resulting from injury Legal action also permitted if injured dies/sustains serious disﬁgurement/impairment of physical/mental/psychological function Private V. Government Insurers Cont’d No Fault Auto Insurance Plans NO FAULT PLAN (Saskatchewan) ○ Motorists (incl. Canadian visitors) = automatically in modiﬁed no fault plan ○ January 2003, residents could choose to change to tort plan but: Less than 1% did it ○ Modiﬁed No Fault Plan Claimants claim compensation for injury/death from own insurer If amounts are insufficient AND claimant demonstrates economic loss, legal action can be taken Ex. MAX income beneﬁt payable is $61,139/year (2005), indexed for inﬂation When not enough, legal action = Application Form Purpose Obtain necessary info to correctly underwrite/rate/issue auto insurance policy Insurance Acts (common law provinces) require application to be: Actual part of insurance contract Signed by applicant If application is done over phone or from someone other than Named Insured, insured’s signature must be on the true copy of the application When issued: Policy deemed to in accordance with application ○ Unless, insurer advises in writing in what respect policy differs from app. Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) must be fully answered by applicant NOTE: S.P.F No. 1 - Owner’s Form-used to insure private passenger & commercial vehicles, so application form contains questions speciﬁc to both uses, as follows: 1) Applicant’s FULL name/postal address (county/district) All contract’s parties are ID’d (name/addresses are conﬁrmed) ○ Reduces errors Insurer requests driver’s abstract (record of driver history) ○ For applicant/other drivers TERRITORY ○ Area auto is predominantly used Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 2) Policy Period (not usually longer than 12 months) Coverage starts when application is taken → Expires at 12:01am standard time ○ At insured’s address 3) Particulars of Described Auto Insurer must ensure auto being claimed is insured by policy ID vehicle(s) insured (info must be on application) ○ Model year ○ Trade name ○ Model or C.C. ○ Body type ○ V.I.N. (Serial number) Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 3) Particulars of Auto Info for rating purposes ○ Insurers keep info on costs of repair/replace makes/models of autos ○ Costs usually increase if auto value increases ○ Expensive autos usually have a higher premium (physical damage) Adjusting future claims: (applicant’s info) ○ If applicant purchases auto, must know: Is auto new/used, date, value (incl. equipment)? ○ Name/address of lienholder/mortgagee Others having ﬁnancial interest in auto are recorded/protected if there is an Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 4) Insuring Agreement Coverage summary provided by policy AND total estimated policy premium ○ MIN retained premium so applicant knows premium amount insurers keeps in case of cancellation or premium adjustment Endorsements to policy also stated in this section Three coverages for insureds (Four in Atlantic Canada) ○ a) Section A - Third Party Liability ○ b) Section B - Accident Beneﬁts ○ c) Section C - Loss/Damage to Insured Autos ○ d) Section D - Uninsured/Unidentiﬁed Coverage (Atlantic Canada) Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 5) List ALL Drivers of Described Autos in Household/Business Insuring Agreements allows use of auto parties not on policy Applicant required to provide: ○ Name of all drivers (as shown on driver’s license) ○ Approx. % of auto use ○ How many years licensed If driver graduated from driver training course: ○ Copy of certiﬁcate is attached Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 6) Physical/Mental Impairment ○ Details of physical/mental impairments of driver affecting safe operation of auto ○ Physical/mental disabilities = increased chance of accident: Frequent fainting Dizziness/Loss of consciousness Heart disorder Epilepsy Diabetes Defective vision/hearing Nervous disorder Depression Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 7) Driver History (screening applicants -- undesirable drivers) Info required: Convictions History (3 years) Offences: impaired driving/speeding/failure to yield right of way If no accidents, may have poor driving habits/disregard for law Application details each conviction/date Accident/claims history (6 years) ○ All accidents/claims from ownership/operation of auto must be reported ○ Accidents caused by applicant ○ Accidents others cause using applicant’s Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 8) License History (6 years) Insurer needs 6-year history of: All drivers in policy All suspensions/cancellations/lapses of any driver’s license/permit/similar authorization Applicants must provide all known info Ex. Driver’s license of spouse suspended 18 months ago BUT applicant didn’t know: this does not prejudice/affect future policy claims Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 9) Insurance History (3 years) Required: name of insurer/expiry date of most recent insurance policy If insurer has: ○ Cancelled ○ Declined ○ Refused ○...to renew/issue auto policy in past 3 years, details required Insurers don’t cancel/deny coverage without reason ○ Insurer usually contacts previous insurer for the reason ○ Applicant provides all known info Ex. Applicant’s child denied insurance 2 years ago unbeknownst to applicant: Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 10) Use of Auto: Applicant declares: Auto’s predominant purpose: ○ Pleasure or business If used to commute, and the distance ○ DEFN Commute: driving to work/school/part way to public transit Annual average distance driven Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 11) Business Use Insurer must be advised if auto is used for business: ○ Rented/leased to others ○ Carrying passengers for compensation/hire (Taxi/bus) ○ Carrying explosives/radioactive material ○ Transport of goods - compensation (moving/delivery vans, trucks (livestock) S.P.F. No. 1 - Owner’s Form doesn’t cover above businesses UNLESS ○ A special endorsement is issued Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 12) Declaration of Ownership - Registered or Actual If applicant not both registered AND actual owner ○ Insurer needs more info to properly assess the risk Auto owners with poor driver history ○ May try to reduce premiums via. insuring auto in another’s name who has a better driver history ○ Registered/actual ownership details are to prevent this Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 13) Penalty for False Statement(s) Insurance Acts (common law) require consequences of false statements be clear Right to recovery is forfeited when: Insured gives false description of auto to prejudice of insurer Insured misrepresents risks/doesn’t disclose required fact(s) ○ Most court cases arise from applicant not being registered owner. Other misrepresentations relate to previous accidents, insurance refusals, intended use of vehicle Breach of policy: Auto used for illicit/prohibited Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 13) Penalty for False Statement Applicant warrants truth in all statements: ○ Allows insurer obtain (any source) reports on them/credit/factual/ investigate/driver record info connected to application/renewal/extension If insurers want to verify info, two sources: ○ Department of Motor Vehicles (or other provincial registry with jurisdiction) ○ Applicant’s previous insurer (name must be in application if applicable) Reverse side of application contains add’l info: a) Additional Info: Applicants provide info on drivers on policy/# autos in house ○ Type of fuel (gasoline/diesel), Description of Application Form Cont’d Info Required for Auto Insurance Application (Owner’s Form S.A.F. 1) 13) Penalty for False Statement c) Broker’s Report ○ If broker knows applicant ○ If business is new (to broker’s office) ○ If coverage is bound ○ If motor vehicle liability card is issued ○ Premium amount paid with application ○ Other insurance (with insurer) ○ Special circumstances insurer should know Create a “What” question Students take two minutes to create a “What” question based on the concepts covered so far, in the chat window. No question is too simple! Remember the Forgetting Curve! Section 2 - S.P.F. No. 1 - Owner’s Form Coverages S.P.F. No. 1 - Owner’s Form Alberta, Atlantic Provinces, Yukon Territory, NW Territories - more similarities than differences, brokers should check the S.P.F. No. 1 - Owner’s Form used in the province they do business. Section A - Third Party Liability 1) Insuring Agreement ○ Insurer will ID insured/every person (with owners consent) who personally drives auto/personally operates any part Insured to same extent as named insured, provided permission from owner received ○ Indemnify against liability on insured/other party for loss/damage from ownership/use/operation of auto AND Section 2 - S.P.F. No. 1 - Owner’s Form Coverages Cont’d Section A - Third Party Liability 1) Insuring Agreement DEFN Persons Insured ○ a) Named Insured AND ○ b) Parties personally driving auto with Named Insured’s consent AND parties with owner’s permission to drive (covered as if their name is on policy) Cloudy Consent: Family members/residents of same household OR party with owner’s permission allows another to drive ○ c) Parties personally operating part of auto with Named Insured’s consent Common injuries/damages are when auto is moving but also PARTS of stationary vehicle (door, hood, trunk) If auto’s door is opened and another Section 2 - S.P.F. No. 1 - Owner’s Form Coverages Cont’d Section A - Third Party Liability 1) Insuring Agreement Insuring Agreement - When Policy Pays ○ Covered when insured is legally liable for bodily injury/property damage to 3rd party from ownership/use/operation of auto ○ Owner/driver usually liable for negligent vehicle operation Multiple auto drivers involved in an accident can be appointed a percentage of responsibility ○ No deductible to losses paid Section A - Third Party Liability 2) Exclusions: Liability imposed by workers’ compensation law on parties insured (this section) ○ If liability is in worker’s compensation plans’ scope N/A in Ontario Loss/damage from bodily injury/death of employee of persons insured while operating/repairing auto ○ Removes coverage on employees injured while repairing/operating auto (usually insured by worker’s compensation plan) ○ Ex. Public truckers, bus drivers, drivers of delivery vans/trucks ○ In exchange for these No fault beneﬁts: Voluntarily give up right to sue employer for damages Section A - Third Party Liability Cont’d 2) Exclusions: Loss/damage to property in/upon auto OR property owned/rented by/in care/custody/control of parties insured by this section ○ Avoids paying for property insured is transporting ○ Payment through habitational/business policy ○ Policy used to insure trucks to transport (compensation) goods of others Special cargo insurance covers Amounts exceeding limits Section A - item 4 (application) AND expenditures provided for in Additional Agreements, subject to provisions ( Insurance Act - Auto Insurance Part) that relates to to nuclear energy hazard ○ Insurer’s liability is restricted to: limits Section A - Third Party Liability Cont’d 2) Exclusions: Liability from property contamination (in auto) Exposure: commercial truckers hauling goods (compensation) Added (1970s) when gas was contaminated by previous cargo due to improper cleaning of the tank between loads, was then distributed, causing vehicle engine problems to a large number of vehicles Leaking refrigerants/spillage/contamination via smoke/dirt are other types of losses addressed by this exclusion Policy Responds: Injury/Damage to Others From Intoxicated Drivers Covers: Bodily injury/property damage from intoxication (liquor/drugs) Section A - Third Party Liability Cont’d 3) Add’l Agreements of Insurer Policy amount on policy is to pay future judgements against insured If a claim/legal action, other costs must be paid: ○ Investigation/negotiation/settlement of claim cost (costs to insurer) After notiﬁcation, insurer investigates accident If insurer thinks they can settle claim, will assume all negotiation expenses ○ Insured’s defence under policy cost Legal counsel (serious claim) beyond ﬁnancial capability of insured Cost to research/prepare defence, pay expert witnesses can be hundreds of thousands Section A - Third Party Liability Cont’d 3) Add’l Agreements of Insurer Pay ALL costs taxed against insured (any civil action defended by insurer) AND any interest accruing after entry of judgement ON that part of judgement within insurer’s liability limits ○ If civil action tried in court Cost of court’s time may be charged to both/either defendant/plaintiff ○ Insurer agrees to pay add’l costs if levied against insured ○ After judgement and insured is deemed liable: Insurer/consultant decides whether to appeal (may delay settlement cheque days → weeks) ○ If insurer takes 1 day to settle claim, plaintiff entitled 1 day interest of award ○ Insurer will pay interest ONLY on part of Section A - Third Party Liability Cont’d 3) Add’l Agreements of Insurer Reimburse cost of medical aid (immediately) necessary at time of injury If limits are LESS than MIN limits for province/territory that accident occurred, must pay up to those limits if liable ○ If accident in jurisdiction has higher min limits than what’s on policy ○ Insurer will increase insured’s limits to match requirement in the jurisdiction Section A - Third Party Liability Cont’d 3) Add’l Agreements of Insurer Not to establish a defence to a claim not available to it had policy been issued in province/territory where accident occurred If coverages in jurisdiction accident occurred doesn’t exclude payment of loss, insurer can’t use exclusion to avoid payment Examples: Statutory Condition 2 (1) of Ontario Auto Policy (O.P.F. 1): ○ Insured won’t drive/operate OR permit other to drive/operate auto unless insured (other) is authorized (by law) to drive/operate it ○ When auto is used but contravenes condition = no coverage Alberta Standard Auto Policy: ○ Insured won’t drive/operate auto unless is Section A - Third Party Liability Cont’d 3) Add’l Agreements of Insurer ONT resident causes accident in AB, and it is discovered that their license is expired, ONT insurer may deny coverage due to fact that insured wasn’t authorized to drive AB residents with expired licenses can be covered if show they’re qualiﬁed to drive ○ Usually insured's driving for years might satisfy coverage conditions ○ ONT insurer would (via Add’l Agreement) agree to cover on basis similar to what is given to AB residents Section A - Third Party Liability Cont’d 4) Agreements of Insured a) By acceptance of policy, Insured constitutes/appoints insurer as his/her irrevocable attorney Provides insurer with authority to control defence of action (against insured) Money spent (by insured) to get own legal counsel at insured’s cost b) Insured will reimburse insurer for amounts paid (under policy) for provisions of statute relating to auto insurance that insurer wouldn’t be liable Insurer may want repayment from insured if have to pay a 3rd party claim because of operation of statute (ex. Absolute Liability) they wouldn’t otherwise have to pay Section B - Accident Beneﬁts Introduced in 1960’s Gives immediate access to funds for payment of medical/other aid due to injury from auto accident Parties entitled to collect beneﬁts include: ○ Injured drivers/occupants of autos/pedestrians Beneﬁts: no fault basis ○ Don’t have to show insured was legally responsible for injuries to claimant Payment ( this section) for nominal amounts only ○ Not to indemnify victims (for loss) ○ (most provinces) victims must sue party at fault for full compensation for injuries Section B - Accident Beneﬁts Cont’d Subsection 1 - Medical Payments/Funeral Expenses Medical Payments Insurer reimburses insured: Reasonable expenses within 2 years (4 years some provinces) for: ○ Medical/surgical/chiropractic/dental/hos pital/professional nursing/ambulance service ○ Other services/supplies essential for treatment/rehab Insurance limits provided to each insured varies provincially ○ (Canadian Auto Insurance Plans summary at end of chapter) ○ Payment amount by insurer may be reduced by amount payable OR recoverable under Section B - Accident Beneﬁts Cont’d Subsection 2 - Death Beneﬁts/Loss of Income Payments Part I - Death Beneﬁts Amount payable (death beneﬁt) AND way to determine amounts varies Death beneﬁt $10k-$50k provided when deceased is head of household ○ Structured payments (reduced amounts) might be provided if are dependents (most provinces) If deceased is SPOUSE, most provinces give lower survivor beneﬁts than payment when deceased is head of household ○ Head of household has largest income in year preceding date of accident If deceased is dependent, death beneﬁts (usually) reduced (a lot) Section B - Accident Beneﬁts Cont’d Subsection 2 - Death Beneﬁts/Loss of Income Payments Part II - Loss of Income ○ Insureds (most provinces) qualify for loss of income coverage when they suffer: Inability to perform (essential) duties of occupation/employment ○ Alberta: Difficult qualify for coverage if insureds established that they’re wholly/continuously disabled ○ Conditions for coverage Beneﬁts payable (weekly basis - 7 day waiting period) Insurers establish were employed were at time of accident OR (if 18 years+) employed for ANY 6 months during preceding 12 months Beneﬁts stop at 104 weeks Section B - Accident Beneﬁts Cont’d Subsection 2 - Death Beneﬁts/Loss of Income Payments Part II - Loss of Income Spouses not working/other = eligible for beneﬁts ○ Beneﬁts usually less than paid to party employed outside home at time of accident/paid (shorter period) Dismemberment payments: Newfoundland Provinces (compulsory gov’t auto insurance plans) ○ Accident Beneﬁts provided differ from above description Refer to schedule in policy OR provincial regulations Section B - Accident Beneﬁts Cont’d Subsection 3 - Uninsured Motorist Coverage Atlantic Provinces: Uninsured/Unidentiﬁed Auto Coverage in Section D) If driver of uninsured/unidentiﬁed auto causes bodily injury/death to insured ○ Insured’s own policy pays damages (normally assessed against responsible party) ○ Payment limited: Compulsory MIN for bodily injury applicable in jurisdiction accident occurred in ○ Min limits all Canadian provinces (except Quebec/Nova Scotia) is $200,000 Deﬁnition Expansion Deﬁnitions ○ Uninsured Auto Auto where neither owner or driver has applicable liability insurance ○ Unidentiﬁed Auto Auto where ID of owner or driver can’t be determined Section B - Accident Beneﬁts Cont’d Subsection 3 - Uninsured Motorist Coverage Conditions of claim (damages) from unidentiﬁed auto: ○ Must show ID of owner/driver cannot be ascertained ○ Accident is reported to authorities in 24 hours ○ Statement ﬁled (under oath) with insurer in 30 days ○ Auto (that insured was occupant at time of accident) is available for inspection Section B - Accident Beneﬁts Cont’d Subsection 3 - Uninsured Motorist Coverage Exclusions for Section B - Accident Beneﬁts Conditions of claim (damages) from unidentiﬁed auto: ○ Show that ID of owner/driver cannot be ascertained ○ Accident is reported to authorities within 24 hours ○ File statement (under oath) with insurer within 30 days ○ Auto (that insured occupying at time of accident) is available for inspection Section B - Accident Beneﬁts Cont’d Subsection 3 - Uninsured Motorist Coverage Exclusions for Section B - Accident Beneﬁts No payment for bodily injury (all provinces) ○ Due to suicide/attempt thereat, (sane or insane) ○ Party insured under (existing) Workers Compensation plan Payment of accident Beneﬁts excluded for: (some provinces) ○ Injuries due to (In/directly) radioactive material ○ Injuries due to (at time of accident) participating in race/speed test ○ Injuries directly from sickness/disease ○ Injuries due to using auto for illicit/prohibited trade/transport Section B - Accident Beneﬁts Cont’d Subsection 3 - Uninsured Motorist Coverage Exclusions for Section B - Accident Beneﬁts Excluded: payment of income beneﬁts loss for bodily injury (All provinces): ○ a) Loss by convicted party - impaired driving offence (alcohol/drugs) ○ (80mg+ of alcohol in 100ml of blood + driving) OR impaired driver Saskatchewan: income beneﬁts loss = provided if accident involves: First impaired driving conviction in 5 years OR Impaired driver didn’t cause accident ○ Some provinces, exclusion extends to parties: Charged with breathalyzer offense, Section B - Accident Beneﬁts Cont’d Subsection 3 - Uninsured Motorist Coverage Exclusions for Section B - Accident Beneﬁts Excluded: payment of income beneﬁts loss for bodily injury (All provinces): ○ b) Loss by auto driver who isn’t (for the time) authorized by law/qualiﬁed to drive vehicle ○ Exclusions DON’T APPLY when death is caused to insured Create a “How” question Students take two minutes to create a “How” question based on the concepts covered so far, in the chat window. No question is too simple! Remember the Forgetting Curve! Section C - Loss/Damage to Insured Auto 1) Insuring Agreement Insurer will indemnify insured against direct/accidental loss/damage to auto (including equipment) Payment (accidental losses) is covered, regardless of fault PAST: physical damage coverages were not limited to speciﬁc amount ○ HOWEVER auto costs have increased SO insurers have started to limit coverages on policies ○ Ex. One private insurer’s limits one accident to no more than $85,000 ○ Manitoba: coverage (gov’t plan) restricted to $40,000 for private passenger autos $15,000 for pleasure trucks/motor homes/trailers Section C - Loss/Damage to Insured Auto Cont’d 2) Coverage Options: owners choose any/combo of 4 physical damage coverages: Subsection 1 - All Perils: From All Perils Broadest physical damage coverage (has broadest interpretation of theft) ○ INSURED: Loss from theft Saskatchewan/Manitoba: ○ Autos insured under gov’t plan are automatically covered Section C - Loss/Damage to Insured Auto Cont’d 2) Coverage Options: owners can choose any or a combo of four physical damage coverages: Subsection 2 - Collision/Upset From Collision with Another Object/By Upset Coverage restricted to losses from collision with another object/by upset NO DEFN of Collision: ○ Usual collision accident: insured auto strikes/is struck by another auto Collision coverage includes “one vehicle” accident ○ Auto strikes tree/guard rail/post/other object Section C - Loss/Damage to Insured Auto Cont’d Subsection 3 - Comprehensive: From ANY peril (other than collision with another object/upset) Insures all losses, excludes collision with another object/upset Not Covered (collision) ○ Limited: not desirable because is a “stand alone” coverage ○ Ex. No coverage for: Loss from impact with vehicle that auto is attached Damage due to camper trailer (towed by insured’s auto) jack-knifes, causing damage to rear (fender) of auto Damage due to insured auto colliding with auto towing it ○ Loss from impact with surface (ground) and object therein/on No coverage: damage to auto from Section C - Loss/Damage to Insured Auto Cont’d Subsection 3 - Comprehensive: Collision Losses Not Insured: IMPACT WITH ANIMALS: (technically collision loss) most claims settled under comprehensive coverages. Advantages: a) Deductible (comprehensive claims) usually less than for collision losses b) Claims not as chargeable losses/don’t affect renewal premium charged to insured (to same extent) Animal impact claims are not treated the same: Losses due to wild animals usually paid under comprehensive coverages in policy: Damage from impact with domestic animals = collision losses Collision losses = chargeable accidents Section C - Loss/Damage to Insured Auto Cont’d Subsection 4 - Speciﬁed Perils due to ﬁre/lightning/attempted and successful theft/windstorm/earthquake/hail/explosion/r iot/civil commotion/falling OR forced aircraft landing OR parts/rising water/stranding-sinking-burning-derailment- collision conveyance in/upon auto transport on land OR water Speciﬁed Perils coverage ○ Too restrictive for perils with high loss risk when auto is in motion ○ For autos with regular use/Collision or Upset coverage is also bought ○ For owners of unlicensed autos in storage Theft coverages: ○ ONLY the All Perils coverage covers loss when theft due to auto stolen by parties residing in same dwelling premises Section C - Loss/Damage to Insured Auto Cont’d 3) Deductible Clause Coverage (S.P.F. No. 1 - Owner’s Form): Insurer pays loss amount LESS deductible chosen by insured ○ Ex. Deductible chosen ($200), Loss amount ($13,200), Payment: ($13,000) Saskatchewan/Manitoba: Extension bought by insured (private insurer) pays DIFFERENCE between policy deductible and gov’t plan’s deductible Saskatchewan Example (under Extension Policy) Gov’t plan deductible amount ($700), Deductible under “Extension Policy” ($200), Loss ($13,200), Payment (Gov’t pays $12,500 ($13,200-$700)). ○ Insurer pays difference in deductible amounts ($500) Section C - Loss/Damage to Insured Auto Cont’d 3) Deductible Clause No deductible if loss is due to: ○ 1. Fire ○ 2. Lightning ○ 3. Theft (entire vehicle) ○ 4. Wildlife Collision (sometimes) If at-fault driver is uninsured ○ Insureds pay their own deductibles ○ Sometimes recovered via. small claims court Different deductible for each coverage ○ Ex. Insured chooses $250 deductible for Collision or Upset, and $100 deductible for Comprehensive losses Section C - Loss/Damage to Insured Auto Cont’d 4) Exclusions Applicable to All Coverages - Section C a) Loss/Damage To tires consisting/caused by… ○ Mechanical breakdown ○ rusting/corrosion ○ wear/tear ○ freezing/explosion in combustion chamber ○ UNLESS losses = coincidental with other losses OR caused by ﬁre/theft/malicious mischief (covered) Losses due to normal operation of auto not insured ○ Ex. Tire loss: punctures, blowouts, wearing of upholstery, etc. ○ Covers: damage from accident (insured under this section) OR Section C - Loss/Damage to Insured Auto Cont’d 4) Exclusions Applicable to All Coverages - Section C b) Due to conversion/embezzlement/theft or secretion by party in lawful possession of auto under mortgage/conditional sale/lease/other (similar) written agreement Conditional sale/lease: ○ Vehicle title is with seller until purchaser has paid full price Mortgage agreement: ○ Title vested in purchaser BUT mortgagee may take vehicle back if default of mortgage payments S.P.F. No. 1 - Owner’s Form insures businesses selling/ﬁnancing/leasing autos ○ No coverage: stolen/feloniously taken auto from insured Section C - Loss/Damage to Insured Auto Cont’d 4) Exclusions Applicable to All Coverages - Section C c) Due to voluntary parting with title/ownership, regardless of induced to do so by fraudulent scheme/trick/device/false pretense Ex. insured sells auto/accepts cheque that bounces ○ Claim of theft is denied d) Due to contamination (radioactive material) e) Contents of trailers/rubs/robes Excluded: Property in cabin/other trailer Coverage is endorsed into habitational policy f) Tapes/equipment used with tape player/recorded when they are detached Losses covered under insured’s habitational Section C - Loss/Damage to Insured Auto Cont’d 4) Exclusions Applicable to All Coverages - Section C g) Insured drives/operates auto when intoxicated (liquor/drugs) - is incapable of proper control of auto At time of accident: law officers might be called to judge ability to drive Officers may decide that party has had alcoholic beverages, BUT are still able to exercise proper control of auto ○ Physical damage to auto is covered Most provinces: coverage excluded if insured is convicted: ○ Impaired driving ○ Breathalyzer offence ○ Refusing to undergo roadside test or breathalyzer test h) Insured permits/suffers/allows/connives Section C - Loss/Damage to Insured Auto Cont’d 5) Add’l Agreements of Insurer a) Insurer agrees: will extend physical damages coverage (Section C of S.P.F. No. 1 - Owner’s Form) to include costs that insured may be liable General Average ○ Marine Law: ship’s captain is entitled to use all (reasonable) means to ensure safety ○ Ex. Captain’s authority: order cargo to be jettisoned/thrown overboard to prevent vessel from sinking If 50/200 autos are jettisoned: even though no loss to insured’s auto, insurer agrees to participate in general averaging of amount of loss among all auto insurers Section C - Loss/Damage to Insured Auto Cont’d 5) Add’l Agreements of Insurer a) Insurer will extend physical damages coverage (Section C of S.P.F. No. 1 - Owner’s Form to include costs that insured may be liable Salvage ○ Insurer will pay costs incurred to save auto from further loss after accident Ex. Costs for tow truck/storage compound charges Fire Department Charges ○ Charge when ﬁre department is called (put out a ﬁre) involving auto owned by persons who aren’t ratepayers in that community ○ Insurer will pay expenses Customs Duties of Canada, or USA ○ If auto = damaged (accident) in USA and repair is made there, costs are subject to Section C - Loss/Damage to Insured Auto Cont’d 5) Add’l Agreements of Insurer b) Insurer will waive subrogation against every party with care/custody/control of insured’s auto with insured’s consent EXCLUDING Parties with possession for garaging purposes Parties breaching policy condition Drivers/operators convicted of alcohol-related offence at time of damage: ○ Impaired driving, breathalyzer offence, refusing to take road test Auto is damaged by party with consent to use auto, insurer will not subrogate against party for any amount (paid under policy) Insurer seeks subrogation against person breaching: Section C - Loss/Damage to Insured Auto Cont’d 5) Add’l Agreements of Insurer c) Indemnify insured/others personally driving temporary substitute auto for liability imposed (by law)/assumed (under contract/agreement) for direct/accidental physical damage to vehicle ○ Ref: Item 5 of General Provisions, Deﬁnitions, Exclusions ○ Physical damage coverages = same as Section C, Loss of/Damage to Insured Auto of insured’s own policy Section C - Loss/Damage to Insured Auto Cont’d 5) Add’l Agreements of Insurer d) Loss of Use by Theft Theft coverage: insurer will extend coverage to loss of use if theft of entire auto Ex. If only motor is stolen, loss of use isn’t insured by policy Coverage Conditions ○ Reimbursement up to $25/day → max 30 days ○ Payment ONLY costs of renting substitute auto (incl. taxi/public transport) ○ 72 hour waiting period starts after notice of theft to insurer or policy Coverage ceases (whichever is sooner) ○ a) Repair completion date OR lost/damaged property replacement ○ b) When insurer pays for loss/damage from Section D - Uninsured/Unidentiﬁed Auto Coverage Section B - Accident Beneﬁts is a liability coverage Insurers (other provinces - ONT/Atlantic) give coverage its individual Insuring Agreement (focus of this discussion: policy wordings in Atlantic provinces) Extensive bodily injury/property damage from drivers of uninsured/unID’d autos ○ Insuring Agreement: victims can claim under own policy Persons Insured Type of loss/damage decides party’s eligibility to claim under Insuring Agreement Driver/owner of uninsured/ID’d auto = legally Section D - Uninsured/Unidentiﬁed Auto Coverage Section B - Accident Beneﬁts is a liability coverage ○ Conditions for claims for bodily injury/death Report accident to police/other authorities within 24 hours File written statement with insurer within 30 days after accident OR as soon as practicable If practicable AND requested by insurer: auto insured was occupying (at time of accident) must be available for inspection Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d Coverage ○ a) Physical Damage to Insured Auto/Loss/Damage to Contents Payment: loss/damage to insured auto and/or contents only when Loss/damage caused by uninsured auto Owner/driver is ID’d Deductible ($250) to all losses from any ONE accident No coverage: damage from unID’d autos Payment for losses would be under collision coverage ○ (Section C - Loss/Damage to insured Auto) Costs from “loss of use” of auto AND which owner/driver of uninsured auto is legally liable = recoverable Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d Coverage ○ b) Bodily Injury/Death Insurer will pay all sums for bodily injury/death from uninsured/unidentiﬁed auto that parties insured by Agreement are legally entitled Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d Limits/Exclusions Payment conditions for injury/damage from uninsured/unidentiﬁed auto: Payment amount (by insurer) won’t exceed MIN statutory limits needed by auto owners in province ○ Ex. Most provinces: auto owners must have MIN $200,000 liability insurance Insurer WON’T pay claims in provinces exceeding $200,000 Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d Limits/Exclusions Payment conditions for injury/damage from uninsured/unidentiﬁed auto: Injury/damage in other province/state - insurer liable for LEAST of: ○ a) MIN limit motor vehicle liability coverage in other jurisdiction ○ b) MIN limit needed in insured’s own province Can reduce limit for insureds injured/killed while travelling/visiting other jurisdictions Ex. Many USA states set liability insurance requirements for bodily injury/death for one party @less than $25,000 Almost all states: amount of property Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d Limits/Exclusions Payment conditions for injury/damage from uninsured/unidentiﬁed auto: Insurer not liable to pay claim from accident in or jurisdiction when insured has valid claim from unsatisﬁed judgement fund OR similar ○ Govt’s (some areas) established unsatisﬁed judgement funds to pay auto accident victims involving uninsured/unidentiﬁed motorists Accident in other jurisdiction, damage claim must ﬁrst be sought from other fund ○ Gov’t operated funds not used in Atlantic provinces When other insurance exists: amount Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d Determination of legal Liability/Amount of Damages Insured’s right to recover damages/amount of damages determined by: ○ Written agreement (claimant-insurer) ○ Claimants requests recover damages AND insurer agrees (arbitration) ○ Court Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d Notice/Proof of Claim Steps to Make a Claim for Bodily Injury/Death ○ a) Give insurer (written) notice of claim (30 days after accident date/ASA Practicable) ○ b) Give detailed proof of loss to insurer (90 days after accident) ○ c) Upon request, give insurer medical certiﬁcate with cause/nature of accident/probable duration of disability ○ d) Give (insurer) details of other insurance policies (except life insurance) where beneﬁts could be received Insurer’s right: arrange for one (or more) physical/mental examinations of claimant while claim is pending Claim: Death of person insured by agreement: Section D - Uninsured/Unidentiﬁed Auto Coverage Cont’d When Not Eligible For Coverage D - Uninsured Auto Coverage Person: not insured but auto policy OR has inadequate insurance Might apply to Facility Association for damages payment Purpose of fund (Facility Association establishes): ○ Pay for bodily injury/death claims by uninsured/unidentiﬁed autos ○ Payment limit: $200,000 NO COVERAGE for damage payment (claimant’s auto) ○ At time of accident: actual/registered owner was driving auto/had care/control of auto (regardless of whether in motion or not) Theft: Major Cause of Loss The slides for “Theft: Major Cause of Loss,” have been moved to the CAIB 1 Chapter 6 Insurance Graphic Organizer (IGO) which can be accessed through your student portal. Text page 6-28 You can submit your IGO activity to your facilitator or ask questions in class. For an explanation of the slide information and an answer to the activity, please check out the “IGO Answers” videos in your student portal. Please ask questions if you need to! General Provisions, Deﬁnitions, Exclusions 1) Territory Coverage restricted to Canada, USA, vessels between ports of those countries No Coverage (losses) In Mexico Motorists must buy insurance from Mexican gov’t before allowed to drive Documents show vehicle is insurable (prevents smuggling vehicles to MX) Motorists have to give documents before permitted entry ○ Driver’s license ○ Vehicle registration/rental agreement copy If driver = not owner, must get affidavit from owner (consenting entry into mexico) Auto insurance policy must have coverage 2 months prior to entering MX General Provisions, Deﬁnitions, Exclusions Cont’d 3) Consent of Insured Any party using auto/is occupant of auto without owner’s consent isn’t entitled to policy beneﬁts Removes: Section B - Accident Beneﬁts FROM: (excludes) ○ Parties injured while occupying stolen vehicle, AND auto passengers even if they are unaware auto was stolen Issue of consent ○ Difficult when party getting permission to use auto let other parties drive ○ Persons living in insured’s household use auto without express consent Argument: driver had owner’s implied permission to drive auto General Provisions, Deﬁnitions, Exclusions Cont’d 4) Garage Personnel Excluded Parties engaged in business not insured under policy ○ Ex. (selling/repairing/maintaining/storing/se rvicing/parking autos) ○ Even when have owner’s permission to operate auto Separate coverage: loss/damage from using customers’ autos General Provisions, Deﬁnitions, Exclusions Cont’d 5) Automobile Deﬁned Under Section A, B, C, (D in Atlantic Canada) a) Described Auto ○ S.P.F. No. 1 - Owner’s Form insures any auto/trailer/semi-trailer As described on the policy b) Newly Acquired Auto ○ Does not apply in British Columbia ○ Newly Acquired Auto is automatically insured when... Replaces auto described on policy Is in addition to other autos owned by insured Are all insured by same insurer General Provisions, Deﬁnitions, Exclusions Cont’d 5) Automobile Deﬁned Covers: ○ 14 days without need to notify insurer ○ Before 14 day expiry, insurer needs to be directed to insure replacement/add’l vehicle Insurer might need to be advised: ○ Automatic extension of coverage doesn’t give the authority to drive unregistered auto ○ If licensing authorities need immediate registration of the newly acquired auto, insured MUST FOLLOW ○ if do not follow, ﬁne may result General Provisions, Deﬁnitions, Exclusions Cont’d 5) Automobile Deﬁned Under Section A, B, C, (D in Atlantic Canada) a) Temporary Substitute Auto ○ DEFN: Temporary Substitute Vehicle Used (temporarily) as substitute for auto on policy Can’t be auto owned by parties living in same dwelling Cannot be another auto owned by insured Only if described auto can’t be used due to breakdown/repair/servicing/loss/dest ruction/sale Ex. Service loaner for insured’s use while auto = under repair/body work General Provisions, Deﬁnitions, Exclusions Cont’d 5) Automobile Deﬁned Under Section A, B, C, (D in Atlantic Canada) b) Any Other Auto of Private Passenger/Station Wagon Type, Provided: ○ Auto isn’t owned/regularly used by insured/person living in same dwelling ○ Insured is individual (or spouse) living in same household ○ Auto isn’t used for garaging activities/carrying passengers for compensation/hire/commercial delivery ○ Auto isn’t owned/hired/leased by insured’s employer/employer of any party living in same dwelling General Provisions, Deﬁnitions, Exclusions Cont’d 5) Automobile Deﬁned Under Section A, B, C, (D in Atlantic Canada) Vehicles under (d) ○ Covers insured and spouse only ○ If other drivers are in household, S.E.F. #2 - Drive Other Autos - Named Persons Endorsement should be added ○ Vehicles of the “private passenger or Station Wagon type” If insured owns a pickup/commercial type vehicle, should purchase S.E.F. #36 - Commercial Automobiles used Exclusively for Pleasure Note: Some insurers may automatically read these endorsements into the policy General Provisions, Deﬁnitions, Exclusions Cont’d 5) Automobile Deﬁned Under Section A, B, C, (D in Atlantic Canada) Vehicles under (d) ○ Insureds renting auto (private passenger/station wagon type) in own name Same limits of 3rd Party Liability & Accident Beneﬁts coverage (under auto policy) BUT must arrange with insured’s insurance company (S.E.F. #27)/lessor to buy physical damage coverages ○ NEWFOUNDLAND - 3rd Party Liability Only General Provisions, Deﬁnitions, Exclusions Cont’d 5) Automobile Deﬁned Under Section A, B, C, (D in Atlantic Canada) c) Insured is: Corporation,Unincorporated Assocn. OR registered Co-Partnership ○ If insured is a business: Covers private passenger vehicle OR station wagon ○ Must be driven by employee, partner, spouse of either, as long as have exclusive use of auto PROVIDED: Don’t own vehicle of private passenger/station wagon type Auto is of: private passenger/station wagon type Isn’t used for a garaging business Isn’t owned/frequently used by insured’s employee/partner/persons General Provisions, Deﬁnitions, Exclusions Cont’d 5) Automobile Deﬁned Under Section A, B, C, (D in Atlantic Canada) d) Trailers - (used in connection with auto_ ○ If loss results from trailer in connection with insured auto, policy responds Trailer doesn’t need to be owned by insured General Provisions, Deﬁnitions, Exclusions Cont’d 6) Two or More Autos a) When 2 (or more) autos are insured with same insurer, each is insured under a separate policy ○ If loss from non-owned autos, insurer not liable for more than HIGHEST liability limit (on policy) for ONE described auto b) When auto (causing loss/damage) isn’t owned by insured AND insured doesn’t insure all owned autos with same insurer THEN ○ Amount under policy = subject to proportionate adjustment with other policies General Provisions, Deﬁnitions, Exclusions Cont’d 6) Two or More Autos c) 3rd Party Liability and Accident Beneﬁts Coverage ○ Extends: covers motor vehicle with 1 (or more) trailers/semi-trailers attached (Section C - Loss of/Damage to Insured Auto) Each are separate autos Effect: two deductibles applicable if damage to both auto and trailer in a single accident General Provisions, Deﬁnitions, Exclusions Cont’d 7) War Risks Excluded If insurers had to pay physical losses to property from acts of war, they would be bankrupt 8) Excluded Uses: (unless endorsed) a) Leased/Rented ○ Insureds paid to use own autos in jobs AREN’T renting/leasing autos to their employers ○ Covers: if loss/damage from operation of autos b) Used to carry explosives/radioactive material General Provisions, Deﬁnitions, Exclusions Cont’d 8) Excluded Uses: (unless endorsed) c) Used as taxi/sightseeing conveyance/carrying passengers for compensation/hire Following NOT deﬁned as “carrying of passengers for compensation/hire” even if money is exchanged i) Car Pools ○ Covers: when arrangement are reciprocal ○ If people pay money instead of driving, this does not constitute use of auto for compensation ii) Sharing trip costs ○ NOT AUTO FOR COMPENSATION if insured accepts money (payment) for gas/other expenses by someone sharing cost of trip General Provisions, Deﬁnitions, Exclusions Cont’d 8) Excluded Uses: (unless endorsed) c) Used as taxi/sightseeing conveyance/carrying passengers for compensation/hire iii) Carrying domestic servants iv) Carrying clients/customers/prospective clients/customers ○ Parties using autos while carrying out employer’s business will carry people they are doing business with ○ Business might be transacted Use of auto ISN’T AUTO FOR COMPENSATION v) Occasional/infrequent use of auto for transport of children to/from activities as part of educational program ○ Insured might transport kids to school events that they are reimbursed for cost Real World Application Students have two minutes to think of a realistic or real-life situation that applies to one of the concepts covered in the course so far. Remember the Forgetting Curve! Statutory Conditions Statutory Conditions in S.P.F. No. 1 - Owner’s Form = mostly same all provinces Items 1, 8, 9 apply only to Section B - Accident Beneﬁts 1. Material Change in Risk Insured REQUIRED to notify insurer immediately (written) of known changes (material to contract) INCLUDING: ○ a) Change in insurable interest in auto by: sale/assignment/otherwise EXCEPT change of title succession/death/proceedings under Bankruptcy Act ○ b) Mortgage/Lien/encumbrance that affects auto after application for contract ○ c) Other insurance If change in insurance interest that may lead Statutory Conditions Cont’d 2) (1) (Prohibited Use (by Insured)) 1) Insured will not drive/operate auto… ○ a) Unless is (for time being) authorized by law/qualiﬁed to drive OR Insureds cannot drive unless have a valid driver’s license/permit/can prove qualiﬁed to drive Provinces NOT USING S.P.F. No. 1 - Owner’s Form may restrict auto use to parties “qualiﬁed and authorized” No coverage: insured doesn’t have a valid driver’s license/permit If province has compulsory gov’t auto insurance plans, insured buying Extension Policy usually receives (beneﬁt) broader coverage Statutory Conditions Cont’d 2) (1) (Prohibited Use (by Insured)) 1) Insured will not drive/operate auto… b) While license to drive/operate auto is suspended OR right to obtain license is suspended OR prohibited (under order of court) from driving/operating auto ○ NO COVERAGE If status of insured’s driver’s license is affected: Suspended driver’s license: Ex. police decides insured isn’t legally impaired, BUT 24 hour license suspense removes danger of driver Right to GET a license is suspended (Ex. Highway Traffic Board/other jurisdiction), insured cannot drive/operate insured auto Prohibited ( court order) from driving/operating an auto: Statutory Conditions Cont’d 2) (1) (Prohibited Use (by Insured) 1) Insured WON’T drive/operate auto… ○ c) While under 16 years/other age license/permit to drive may be issued Parties under 16 who may have driving skills to pass a qualifying exam BUT are excluded even if they show they are qualiﬁed to drive ○ d) Any illicit/prohibited trade/transport ○ e) In race/speed test Increases potential for loss Statutory Conditions Cont’d 2) (2) (Prohibited Use (by Others)) 2) Provisions are similar what was just discussed ○ No coverage: Member of insured’s household drives/operates auto while license is suspended/are prohibited by court from driving/operating auto ○ Coverage would be provided if: Insured didn’t know that driver (not member of insured’s household) did not have a valid license Reasonable to know license status of members of own family/household Not assumed you would know status of license of others to whom auto is entrusted Statutory Conditions Cont’d 3) Requirements: Loss/Damage to Persons/Property 1) When bodily injury/property damage to others, insured WILL: ○ a) Promptly provide (written) notice to insurer of accident Time period not stated Must be prompt “Prompt” depends on circumstances ○ b) Verify (by Statutory Declaration) claim is from use/operation of auto AND Person involved (use/operation) is insured under this contract Statutory Conditions Cont’d 3) Requirements: Loss/Damage to Persons/Property 1) When bodily injury/property damage to others, insured WILL: ○ c) Forward (immediately) letters/documents/advice/write received from/on behalf of claimant Protects interests (insured and insurer) Formal litigation: the time courts give to insurer to respond to action may be only a few days If insured fails to respond could result in judgement by default ○ d) Assist insurer: secure info/evidence, attendance of witnesses, co-operate Statutory Conditions Cont’d 3) Requirements: Loss/Damage to Persons/Property 2) Insured WILL NOT ○ a) Voluntarily assume liability/settle claim except at own cost May impair insurer’s ability to give proper defence Right to investigate/defend/settle claims → with insurer Obligations/costs without insurer’s consent aren’t recoverable ○ b) Interfere in settlement negotiations/any legal proceeding Insurer = insured’s irrevocable attorney Insurer has full control of settlement/defence of claims Statutory Conditions Cont’d 4) Requirements: Loss/Damage to Auto: 1) Insured WILL, if loss/damage is covered... ○ a) Promptly report (all) details of loss to insurer (writing) obtained at the time of accident ○ b) (At insurer’s expense), as far as (reasonably) possible, protect auto from further loss/damage After accident = legal obligation (insured) to take reasonable steps to protect auto from further damage Costs of taking such action are paid by insurer Statutory Conditions Cont’d 4) Requirements: Loss/Damage to Auto: 1) Insured will, if loss/damage is covered... ○ c) Provide insurer (in 90 days) Statutory Declarations: full loss particulars Interest of others Existing other insurance Loss/damage didn’t occur via wilful act/neglect/procurement/ means/connivance of insured Notice MUST BE “prompt:” Policy requires proof of loss within 90 days of accident date be provided. If not provided, then not legally bound to honour claim Most insurers provide payment when proof of loss is given (after allowable period) if there is plausible reason Statutory Conditions Cont’d 4) Requirements: Loss/Damage to Auto: 2) Further loss if insured fails to protect auto isn’t recoverable under policy ○ If insured doesn’t take reasonable steps to protect auto from loss, insurer may deny payment on portion of preventable damage 3) Repairs (excluding necessities for protecting auto) may be undertaken AND NO physical evidence loss/damage may be removed... ○ Without insurer’s consent ○ Until insurer has (reasonable) time for examination (Statutory Condition 5) ○ Only repairs made without authorization of insurer are “immediately necessary” for protection of auto Ex. insured can replace tire damaged in Statutory Conditions Cont’d 4) Requirements: Loss/Damage to Auto: 4) Examination of Insured ○ Insured must submit to exam (under oath) at reasonable time/place designated by insurer ○ Produce all docs relating to matters ○ Permit extracts/copies of docs Statutory Conditions Cont’d 4) Requirements: Loss/Damage to Auto: 5) Insurer Liable for Cash Value of Auto ○ Loss/damage according to ACV with deduction (depreciation) ○ Factors Exterior paint/trim/condition Mechanical condition Mileage Interior upholstery/trim Equipment/accessories Tires Other info that affects value ○ Obsolete/out of stock parts: insurer’s liability is limited to: Value of part, at time of loss/damage, not exceeding maker’s latest list price Statutory Conditions Cont’d 4) Requirements: Loss/Damage to Auto: 6) Repair/replacement ○ Except if appraisal ○ Insurer (instead of payment) can repair/rebuild/replace property damaged/lost if (in 7 days after receiving proof of loss) gives (written) notice of intention Insurer can ALWAYS settle on cash OR repair/replacement basis When elects repair/replace, insured must advise within 7 days after proof of loss If no notice (of intentions), entitled to be paid on cash settlement basis Statutory Conditions Cont’d 4) Requirements: Loss/Damage to Auto: 7) No Abandonment Salvage ○ Can’t abandon auto to insurer without consent Prevents insured from abandoning auto at site of accident Even if obvious that auto may be a total loss, insured must protect auto from further loss/damage If auto is replaced OR full actual cash value is paid... Salvage is property of insurer Prevents insured from receiving full settlement PLUS salvage value of wreck Sometimes, insurers allow insured to buy damaged auto after settlement is made Statutory Conditions Cont’d 4) Requirements: Loss/Damage to Auto: 8) If There Is A Disagreement ○ Disagreement of nature/extent of repairs/replacement required OR ○ Disagreement to adequacy/amounts payable THEN Insurance Acts says: Questions are determined by appraisal provided: a) Has been speciﬁc demand (written) b) Proof of loss is delivered to Insurer 5) Inspection of Auto Insured permits insurer (all reasonable times) to inspect auto/equipment Statutory Conditions Cont’d 6) Time/Manner of Insurance Money Payment 1) Payment within 60 days after proof of loss received OR appraisal is made ○ (15 days after award rendered via appraisers) ○ When insurer agrees, will settle claim on cash settlement basis 2) Insured won’t bring action UNLESS ○ Statutory Conditions 3 and 4 are complied with/until amount of loss is determined as therein provided OR ○ Judgement against insured (after trial) OR ○ Agreement between parties (accompanied by written consent of insurer) ○ Insured cannot Take (legal) action against insurer for recovery of claim until ALL requirements (notice) are met OR Statutory Conditions Cont’d 6) Time/Manner of Insurance Money Payment 3) Action against insurer SUBJECT TO: ○ Loss/Damage to Persons/Property Action started within 2 years after cause (not after) ONE YEAR IN ALBERTA ○ Loss/Damage to Auto Action started within 2 years after cause (not after) ONE YEAR IN ALBERTA Statutory Conditions Cont’d 7) Who Can Give Notice/Proofs of Claim Notice/Proof given/made by agent of insured if is absence/inability of insured to give notice/make proof... ○ Absence: unsatisfactorily accounted for/insured refuses ○ By person that any part of insurance money is payable Sometimes insureds can’t give notice of loss/proof of loss ○ Unfair: deny right to collect if legitimately can’t do above ○ THEN: person appointed by insureds can act on their behalf ○ If insureds refuse to ﬁle notice/proof of loss THEN Mortgagee/other party (of interest) can Statutory Conditions Cont’d 8) Termination 1) Contract can be terminated... ○ a) By insurer with 15 days notice (registered mail) or 5 days (personally delivered written notice) ○ b) By insured at any time (on request) 2) Where contract terminated (by insurer) ○ a) Insurer refunds excess premium (pro-rata basis) accounting for MIN retained premium (speciﬁed) ○ b) Refund accompanies notice unless premium = subject to adjustment/determination to amount Refund given ASAPracticable Statutory Conditions Cont’d 8) Termination 3) When insured terminates contract... ○ Refund given on short rate basis subject to MIN retained premium speciﬁed 4) Refund: money/postal/express company money order/cheque payable at par 5) 15 days notice (from insurer) starts on day after receiving registered letter at post office letter is addressed to ○ Provisions: Termination of policy = similar to property insurance policies ○ Reason for termination = not required for either party Statutory Conditions Cont’d 9) Notice ANY (written) notice to insurer can be delivered at/sent (registered mail), to chief agency/head office of insurer in province ○ Written notice given via: letter/personally delivered/registered mail Addressed to him At latest post office addressed notiﬁed to insurer Rules above are stated, transactions usually made via telephone/ordinary mail ○ If matter is disputed, rules (above) apply Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Exclusions in S.P.F. No. 1 - Owner’s Form may be insured under Standard Endorsement Forms (S.E.F.s) Generally same for provinces/territories that have S.P.F. No. 1 - Owner’s Form If NO S.P.F. No. 1 ○ There are policy extensions providing same coverage but different names Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form 1) S.E.F. No. 19a - Valued Auto(s) Endorsement Pay for physical damage losses on S.P.F. No. 1 - Owner’s Form ○ Limited to ACV If purchase this endorsement, agrees: ○ Described autos is valued/insured for amounts stated Often used to insure antique/classic/restored autos ○ Usually appraisal needed before insurer agrees to cover on valued basis Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 2) S.E.F. No. 20 - Loss of Use Endorsement Used only when Section C - Loss/Damage to Insured Auto coverage is bought When loss to auto results in loss of USE to insured, insurer agrees to pay: ○ Rental of substitute auto expenses ○ Taxis/public transport expenses Coverage limits ○ Set to amount/day with max limit/occurrence ○ Most insurers have many options Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 2) S.E.F. No. 20 - Loss of Use Endorsement Coverage starts right away: ○ When damage is enough that auto can’t be operated under own power ○ When auto is stolen Coverage begins on day after report to insurer OR police ○ Other instances: coverage starts when auto is delivered for repair Coverage exceeding Loss of Use by theft is automatically included in S.P.F. No. 1 Section C Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 3) S.E.F. No. 27 - Legal Liability for Damage (to Non-Owned Autos) Endorsement Purpose: cover loss/damage to certain non-owned auto types leased/rented to insureds in own name ○ Used when insureds regularly rent/lease autos on short-term basis If insured’s own auto is covered (S.P.F. No. 1 - Owner’s Form) = eliminates having buying physical damage coverages from lessor/rental agency Coverage applies to autos operated/used/stored/parked in Canada/USA IF: ○ Insured = legally liable (for damage) ○ Insured agree (under contract/agreement) to be responsible for damage Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 3) S.E.F. No. 27 - Legal Liability for Damage (to Non-Owned Autos) Endorsement Limitations: Insured and spouse ONLY* ○ No coverage when auto is damaged when driven by parties other than insured/spouse ○ *some jurisdictions cover all listed drivers on policy Same perils insured under S.P.F. No. 1. - Owner’s Form Only 1 (not more) auto can be rented/leased by insured/spouse at any one time Restricted to speciﬁc auto types: ○ Normally for autos - private passenger/station wagon type ○ Coverage available for damage to moving trucks/vans/other commercial type Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 3) S.E.F. No. 27 - Legal Liability for Damage (to Non-Owned Autos) Endorsement Limitations: Subject to MAX amount in any ONE occurrence Most insurers give standard limit ($15,000) Increased limits can be bought Deductible on insured’s policy applies to ALL losses ○ No deductible for loss due to ﬁre/lightning/theft of entire auto Financial responsibility (damage to rental car) speciﬁed in rental contract ○ Amount varies (approx $2,000-$10,000) ○ Rental contract: can hold insured responsible for higher amount when terms-conditions haven’t been followed: Car driven by unauthorized person Driven in location it shouldn’t have been Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 3) S.E.F. No. 27 - Legal Liability for Damage (to Non-Owned Autos) Endorsement Limitations: Most rental agencies sell Collision Damage Waiver (not insurance) ○ Rental company offering to reduce ﬁnancial responsibility of insured for damage to rental car for daily fee ○ Exclusion example: Falling objects Collision with stationary objects (parking lot dividers) Collisions off-road If you frequently rent autos, endorsement costs less than buying physical damage waiver on each rental Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 4) S.E.F. No. 32 - Recreational Vehicle Endorsement For recreational vehicles insured under: ○ S.P.F. No. 1 Standard Automobile Policy (Owner’s Form) Covers: ○ Unlicensed/unqualiﬁed/underage drivers while rec vehicle used off public highways DEFN of Recreational Vehicle ○ Snowmobiles, trail bikes, midget autos, motor scooters, mini-cycles, snow plantes, motorized toboggans, mopeds, motor assisted vehicles, all-terrain vehicles, dune buggies Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 5) S.E.F. No. 43R - Limited Waiver of Depreciation Endorsement Endorsement is for autos insured under: ○ Section C - Loss/Damage to Insured Auto of auto policy Covers: ○ Depreciation when loss/damage to auto within 24 months of purchase of auto by original owner Coverage limits: (whichever is less) ○ Actual purchase price of auto and equipment ○ Manufacturer’s suggested list price (original date of purchase of auto/equipment) Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 5) S.E.F. No. 43R - Limited Waiver of Depreciation Endorsement Similar coverage for insured leasing vehicle ○ S.E.F. No. 43L Replacement Cost insurance ○ For new autos ○ From some insurers ○ In case of total loss, insureds decide to receive new vehicle (like make/model) OR Cash settlement (equal to original purchase price) PLUS Built-in factor for inﬂation Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 6) S.E.F. No. 44 - Family Protection Endorsement When motorist responsible for bodily injury/death to parties insured by endorsement is: ○ i) Underinsured ○ ii) Uninsured ○ Endorsement increases 3rd Party liability limits to insureds to same limits as bought under own policy Parties qualifying as insureds under endorsement: ○ Named insured and spouse while residing in same dwelling premises ○ Dependent relatives Section 3 - Endorsements Applicable to S.E.F. No. 1 - Owner’s Form Cont’d 6) S.E.F. No. 44 - Family Protection Endorsement Coverage limit Difference between liability insurance limit of insured’s policy AND liability insurance that motorist at fault has Removes uncertainty of funds to carry on after injury/death due to underinsured motorist Different from UNinsured Motorist Coverage (S.P.F. No. 1 - Owner’s Form) If an accident with uninsured motorists, insureds ﬁrst make claim under UNsatisﬁed Judgement Fund (or similar) in province covering MIN Statutory Limits ONLY Endorsement pays difference between amounts awarded under fund and damages awarded by court Section 3 - Other Policy Forms Other Policy Forms Vehicles with commercial use can be insured in this policy Coverage for auto exposures that S.P.F. No. 1 - Owner’s Form doesn’t cover can be obtained from: S.P.F. No. 2 - Standard Driver’s Auto Policy ○ Covers: parties driving autos they don’t own/aren’t registered in their name, Ex. government employees/salespersons ○ Owners of autos usually have bought insurance: Possible coverage is restricted/expired while in use ○ 3rd Party Liability coverage ONLY Section 3 - Other Policy Forms Other Policy Forms Coverage for auto exposures that S.P.F. No. 1 - Owner’s Form does not cover can be obtained from: S.P.F. No. 2 - Standard Driver’s Auto Policy Cont’d ○ All provinces with Accident Beneﬁts coverage (required by law) = added by endorsement ○ Insured can choose to include Physical Damage coverages (S.E.F. No. 60 Legal Liability for Damage to Non-Owned Auto Endorsement) ○ Purpose: Give coverage similar to S.E.F. No. 27 ○ All CDN jurisdictions except: Quebec, Manitoba, Saskatchewan, British Columbia Section 3 - Other Policy Forms Other Policy Forms Coverage for auto exposures that S.P.F. No. 1 - Owner’s Form does not cover can be obtained from: S.P.F. No. 4 - Standard Garage Auto Policy ○ Policy used to insured: Section A - Third Party Liability Covers BOTH owned/non-owned autos Section B - Accident Beneﬁts Section C - Loss/Damage to Owned Autos Covers all/portion of auto owned by insured Section 3 - Other Policy Forms Other Policy Forms Coverage for auto exposures that S.P.F. No. 1 - Owner’s Form does not cover can be obtained from: S.P.F. No. 4 - Standard Garage Auto Policy ○ Policy used to insured: Section D - Uninsured Motorist Coverage Section E - Legal Liability for Damage to Customers’ Autos (in care/custody/control of applicant) All Canadian Jurisdictions EXCEPT: ○ Quebec, Manitoba, Saskatchewan, British Columbia British Columbia: All legal liability coverages must be bought under gov’t auto insurance plan Section 3 - Other Policy Forms \ Other Policy Forms S.P.F. No. 6 - Standard Non-Owned Auto Policy Covers 3rd party liability exposure of business owners from use/operation of autos not owned in whole/part by OR licensed in name of insured ○ May be separate OR more common: an endorsement to business liability policy Covers liability from: ○ Autos owned by employees ○ Hired autos ○ Autos operated under contract (for insured) ○ Call CDN jurisdictions except Quebec, Manitoba, Saskatchewan, BC Section 3 - Other Policy Forms Other Policy Forms S.P.F. No. 7 - Standard Excess Auto Policy Provides 3rd Party Liability limits when need excess coverage ○ More than limits that S.P.F. No. 1 - Owner’s Form provides Usually added to Umbrella Policy All provinces except Quebec S.P.F. No. 8 - Standard Lessor’s Contingent Auto Policy Usually bought by businesses involved in leasing autos on long term basis ○ Indemniﬁes lessor for loss due to DIRECT result of lessee’s failure to: Effect/maintain auto insurance of lease contract All provinces except Quebec/Saskatchewan Recall and Write Students have three minutes to summarize this chapter in 3 sentences or write a question about it, in the chat window. Remember the Forgetting Curve!

CAIB 1 Chapter 6 Slides - Auto Insurance Fundamentals PDF

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