Automobile Insurance Policy

Automobile Insurance Policy

What are the rights and responsibilities of an insured and the insurer under an automobile insurance policy and what are the main terms and conditions that govern an automobile insurance contract in Ontario?

Automobile Insurance Policy

In Ontario, every motor vehicle is required to have a liability insurance coverage pursuant to section 2 of the Compulsory Automobile Insurance Act. An automobile insurance policy is an insurance coverage contract between the insurer and the insured. The terms of such contracts are governed by the Insurance Act and Regulations made under it. Furthermore, another very important document known as (OAP 1) Owner’s Policy that consumers should ask their insurance company to send to them when buying a new policy. OAP 1 Owner’s Policy manual sets the rights and obligations of the insurer and the insured and provides all relevant terms and conditions that apply to any automobile insurance liability insurance coverage in Ontario.

Insured’s Responsibilities under Automobile Insurance Contract

1. You must notify your insurance company promptly in writing of any significant change of which you are aware in your status as a driver, owner or lease of your automobile. You must also tell your insurance company of any change that might increase the risk of an incident or affect your insurance company’s willingness to insure you at current rates. Lastly, you must promptly inform your insurer of any change in information supplied in your original application for insurance, such as additional drivers, or a change in the way your automobile is used.
2. You must inform your insurance company of any sale or transfer of your interest in your automobile except through change of title by succession, death or proceedings under the Bankruptcy and Insolvency Act (Canada).
3. If you have purchased optional Loss or Damage Coverages, you agree to inform your insurance company of any new lien (an interest by others), mortgage or loan that affects a described automobile, as well as any other insurance against loss or damage.
4. When you are involved in an auto accident involving injury or property damage, you need to report it to your insurance agent, broker, or insurance company within SEVEN DAYS, or due to your injuries or disability report as soon as after that.
5. You also agree not to drive or operate the automobile or allow anyone else to drive or operate your automobile, when not authorized by law. This may happen in several ways, such as suspension of your driver’s licence or prohibition of driving a motor vehicle ordered by court order.
6. You agree that you will not use or allow anyone to use your automobile in a race or speed test or for any illegal trade or transportation. Racing or speed contest are types of stunt driving offences under the Highway Traffic Act, which carries significant penalties in Ontario.
7. You agree to permit your insurance company to inspect your automobile and its equipment at all reasonable times.

Claims of Property Damage

You or other insured persons must notify the insurance company of a claim and provide proof of claim. The insurance company will send a “Proof of Loss Form” once the insured files the claim, which the insurer needs to sign and return to the insurer. Proof of loss form records the formal statement concerning a loss for which a claim is submitted. It provides the insurance company with all the information it would need to determine whether the claim is reasonable and the extent of the insurer’s liability. If you are unable to complete the documents personally and file with the insurer, you may have someone act on your behalf.

Payment of Claims

Your insurance company will pay legitimate property damage claim within 60 days of receiving a “Proof of Loss”. However, some claims made under Statutory Accident Benefits Schedule are paid sooner than 60 days. If your insurance company refuses to pay your claim, it will notify you in writing explaining the reasons why it is not liable to pay your claim.

Cancellation of Policy for Non-payment of Premium

Your insurance may give you notice in writing for cancellation of your policy for non-payment of premium. Your insurer must give you 10 days notice if the notice is delivered in person, or 30 days notice by sending the notice by registered mail to your last known address. The 30-day period starts on the second day after the insurance company mails the registered letter. The notice will inform you that you have until noon of the business day before the last day of the notice period to pay the arrears, plus and administration fee, failing which the policy will automatically be cancelled effective at 12:01 a.m. on the last day of the notice period. If you pay the arrears and the administration fee in time, then your policy should not be cancelled. However, if your insurer has already given you two notices of non-payment of the premium during the term of your policy and non-payment occurs again, the insurer is not required to give another notice under this section and may instead cancel your policy. 

General Exclusions

Except for certain Accident Benefits coverage, your insurer will not extend coverage if:

• The automobile is used to carry explosives or radioactive material; or
• The automobile is used as a taxicab, bus, a sightseeing conveyance or to carry paying passengers. However, the following situations are excluded from carrying paying passengers:
  • Giving a ride to someone in return for a ride;
  • Sharing the cost of an occupational trip with others in the automobile;
  • Carrying a domestic worker hired by you or your spouse;
  • Occasionally carrying children to or from school activities that conducted within the educational program;
  • Carrying current or prospective clients and customers, or;
  • Reimbursing volunteer drivers for their reasonable driving expenses, including gas, vehicle wear and tear and meals.

Offences

It is an offence under the Insurance Act to knowingly make a false or misleading statement or representation to an insurer in connection with the person’s entitlement to benefit under a contract of insurance or to willfully fail to inform the insurer of a material change in circumstances within 14 days, in connection with such entitlement. The offence is punishable on conviction by a maximum fine of $250,000 for the first offence and a maximum fine of $500,000 for any subsequent conviction.

It is an offence under the federal Criminal Code for anyone to knowingly make or use a false document with the intent it be acted on as genuine and the offence is punishable, on conviction, by a maximum of 10 years imprisonment.

It is an offence under the federal Criminal Code for anyone, by deceit, falsehood, or other dishonest act, to defraud an insurance company. The offence is punishable, on conviction, by a maximum of 14 years imprisonment for cases involving an amount over $5,000 or otherwise a maximum of 2 years imprisonment.

The information mentioned herein is for general information purposes and shall not be considered legal advice in any way. This shall not establish a paralegal-client relationship. One must seek a proper legal advice from a paralegal or lawyer for his or her case. This article may be used for reference purposes but its publishing is prohibited. Visitors to this website agree with the disclaimer.

Author:

Kashif H. Ali

Kashif Ali is a sole-practitioner and founder of K.N.S. Legal Services. He has been a licensed paralegal since September 2011 and over the years, he has represented hundreds of clients. Mr. Ali personally handles every file and gives his full attention. He ensures that not even a single file is mishandled or overlooked in any way.