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No Fault Insurance in Ontario

In 1989 the Liberal Government of Ontario introduced its first legislated no-fault car insurance scheme. That legislation became effective in mid-1990. Prior to that time Ontario relied on the traditional ‘tort’ or ‘fault system’ to determine who would be entitled to insurance money for injuries suffered in car accident and the quantum they would be entitled to receive.

This article will set out a very brief summary of the fault system, the initial no-fault system in Ontario, a very brief summary of the various changes to that system and an overview of the current system. As will be seen the current system, while intended to provide for certain needs that arise from car accidents where a person suffers personal injuries, the scheme is extremely complex.

The Tort System

The traditional tort or fault based system of Ontario has as its roots the British common law. A “tort” is a civil wrong. In car accident cases the specific tort most commonly at issue is negligence. Historically, if a person was injured by the negligence of another person, the injured person was entitled to be fully compensated by the negligent person. If, however, the injured person was fully or partially negligent they were completely barred from any recovery.

Over time this changed somewhat. Through legislation and our court system a person that was partially negligent became entitled to recover from the other negligent person damages in proportion to the liability. For example, if a person were 50% responsible for the car accident they would be liable for 50% of the damages.

The Initial Ontario No-Fault System

The tort system had flaws. It required the person who suffered personal injuries in a car accident to prove the other driver was negligent before they could sue for damages. If the personal injuries prevented the person from working it often mean serious financial difficulties for that person and their family until the long protracted litigation process was completed.

At the same time car insurance companies wanted protection from what they claimed were the rising costs of litigation. This protection was apparently requested to keep car insurance rates in Ontario lower while at the same time allowing the car insurers to make a profit.

As a result of flaws seen with the tort system the Liberal government of Ontario passed legislation that took effect in 1990 which codified a no-fault car insurance scheme . As of that time anyone that suffered personal injuries in a car accident in Ontario no longer needed to establish fault for the car accident to be entitled to insurance benefits. The government created a schedule of Accident Benefits (often referred to as AB benefits) that entitled every person that suffered personal injuries in a car accident certain medical benefits, rehabilitation benefits, income replacement benefits, housekeeping benefits and various other benefits including certain out of pocket expenses. Who caused the car accident was irrelevant to entitlement. The injured person applied to their own insurance company for these benefits. No pain or suffering was payable under the Accident Benefits nor was 100% of income loss recoverable under the Accident Benefits. There were maximum limits on medical and rehabilitation costs.

Clearly no insurer would be able to pay 100% of every loss for every person who suffered personal injuries in a car accident in Ontario. The cost for insurance would be out of reach. So, in conjunction with the no-fault benefits, the legislation implemented a verbal “threshold” of the severity of injury that must be established before a person suffering personal injuries could sue. There was also a “deductible” for bodily injury similar to the deductible for damage to your car. A certain amount of pain and suffering were expected to be borne by the injured person. Additionally, the accident benefits for income loss were less than 100% and there were maximum medical and rehabilitation amounts.

That first threshold set out that only persons suffering serious and permanent bodily injuries, or serious and permanent scarring, were entitled to sue. Specifically precluded from suing were people whose injuries were only temporary, were psychological in nature or were not serious. Once a person was over that threshold, however, they could sue for pain and suffering, 100% of past and future lost wages, handyman services, etc. To avoid double recovery, there was an accounting to the accident benefits insurer.

Subsequent No-fault Schemes

In 1994 the NDP party completely changed the no-fault legislation. The Accident Benefits changed to be more inclusive. The right to sue became more restricted in some ways and less restricted in others. For example, all rights to lost wages were now consumed by the no-fault accident benefits. No longer could anyone sue for lost past or future wages. On the other hand, a law suit for pain and suffering no longer required purely physical injuries nor did they need to be permanent. Under that legislation, the right to sue was more of a monetary threshold. The deductible went up, but if your pain and suffering exceeded that deductible you could sue, regardless of whether your injuries were permanent or purely psychological.

In 1997 the Conservatives governed. Not surprisingly they took a shot at their own no fault legislation. Back was the right to sue for lost income. Back was the requirement for the injuries to be permanent. Remaining was the right to sue if you suffered psychological injuries only, provided they were permanent. There was a higher deductible put into place.

The Current No-Fault Scheme

Since 1997 there have been further modifications to the no-fault scheme. Today, in Ontario there remains a schedule of accident benefits. This schedule specifies what benefits every person suffering personal injuries in a car accident in Ontario is entitled to, regardless of fault. The maximum amount of medical and rehabilitation expenses depends on whether the injuries are so extensive as to meet a definition of “catastrophic” or not. If a person suffers catastrophic injuries, limits are increased from $100,000.00 to $1,000,000.00.

While the Accident Benefits portion of the current law is complex, the interplay of the tort system and the accident benefits system gets really complicated. First, there remains the necessity of permanence of the impairment or disfigurement to be entitled to sue at all. Second, there is a significant deductible, $25,000.00, for pain and suffering. This deductible is not straight forward, however. If a person suffers pain and suffering which is valued at $100,000.00 or more there is no deductible.

Second, a person can recover, regardless of the threshold, 80% of their net lost income up to the date of trial and 100% of their gross future loss of income from the date of trial forward. There are provisions that require repayment to your own insurance company for any income benefits that you receive under the Accident Benefits that are ultimately paid by the other driver’s insurance company.

A person can sue for various expenses and out of pocket expenses not covered by the accident benefits. Additionally, if your personal injuries meet the definition of catastrophic, you can sue for all of your medical and rehabilitation expenses. Again, there is a requirement to repay any accident benefits you receive in order to avoid double recovery.


The no-fault scheme in Ontario is extremely complex and continually evolving. One must question why an individual must suffer $25,000.00 worth of pain and suffering caused by another? The fact that each of the three main political parties have all decided at one time or another while they governed that they should and would create their own no-fault scheme makes it clear that this is a political issue. It is not simply a process that has evolved from altruistic motives. Insurers in Ontario have long cried poor while at the same time appearing to experience record profits. Lawyers have lobbied on behalf of injured persons while at the same time ensuring their own interests are also looked after. Governments have made campaign promises that they will modify or amend the legislation to protect injured people yet when in office have failed to do so. One example is Dalton McGuinty. He campaigned that he would significantly reduce the deductible and yet failed to meet that promise once in office.

Whether no-fault is better or worse than the traditional fault system is much too difficult to say. What is certain, however, is that any car insurance scheme should be based primarily on the best interests of those persons who suffer personal injuries in car accidents and not on the political whims of the particular party governing at any given moment.

The government apparently wants to limit the costs to insurers of the litigation that would ensue in a pure tort world. This is purportedly to reduce car insurance rates and at the same time “allow” the insurer’s to make a profit. Why then can a person that suffers $100,000.00 worth of pain and suffering recover all of that amount while person that suffers just one cent less pain and suffering can recover only $74,999.99? It is very common for that $25,000.00 difference to be eaten up in lawyer’s fees in those cases where the damages at trial are likely to be somewhere near the $100,000.00 level for pain and suffering. Would it not be more just to give that money to the person with the personal injuries that is living with the pain and suffering?

There is no doubt that a system that allows a person to receive prompt medical treatment will facilitate faster and more complete recovery for persons that are injured in car accidents. The medical experts all agree that the faster someone with soft tissue injuries, for example, receives the appropriate treatment, the more likely they are to recover and the less likely they are to go on to experience chronic pain.

The best system will be one that provides to the injured in those medical and other services that they need quickly and easily.

*This article is not intended to provide legal advice. It is recommended that you consult your lawyer for advice concerning your particular case.

Insurance Salesperson Or Benefits Counselor?

Are you in the insurance industry? Do you help handle the finances and/or human resources in the company you work in? Do you work with other people in the insurance industry? Let me address each set of people and give everyone some free advice…

To the Insurance Industry professional…

How do your clients view you? Are you just a person there to sell them something or are you a trusted advisor who guides individuals based on their separate and personal needs? If your clients hesitate to

talk to you about their real needs, then you may be in the wrong camp. If you are truly the licensed professional that your certificate says you are, you need to take time to get the whole picture of each person you comes in contact with you before you start to suggest options that can fill those important gaps in their insurance portfolios. To get the whole picture of someone and their needs takes a little more time, but it sure does help you sleep better at night knowing that you did what you could to help them fill needs in their own individual lives and not just assume (because you had a great new product to offer) that they needed what you had to sell.

Human Resources/Company Owner…

Who are your vendors for insurance in your company? Better yet, who are your representatives for those vendors? Are they selling your people or providing them what they need? Are they there when you need them for something that does not involve selling something? If your vendors for something as personal as insurance decisions for your individual employees are not attuned to taking the time it takes to talk with your people and see where their needs are, you are doing your company and your people a great disservice. Watch out for vendors who change up representatives every few months. That is a sign of either a harsh work environment (high turnover) or company instability. Do your homework to keep you, your company, and your employees safe from the insurance vultures that are out there.

Insurance Colleagues…

In most people’s eyes, insurance is insurance. If you have partnered with someone to help you with your clients, be sure they have your level of expectations when it comes to integrity and professionalism. If you are not careful whom you pick to partner with, you could find yourself replaced in a company or worse…given a bad reputation because of something “that person you brought in” did.

If you land in any of these categories and would like to be sure you work with a professional person and organization, contact me and I am sure I can help.